Mission Towers v. Grace, Civil Action No. 07-287 (D. Del. 12/6/2007)
| Decision Date | 06 December 2007 |
| Docket Number | Civil Action No. 07-287.,Bankruptcy Case No. 01-01139 (JKF). |
| Parties | MISSION TOWERS, et al., Appellants, v. W.R. GRACE, et al., Appellees. |
| Court | U.S. District Court — District of Delaware |
This appeal follows an April 17, 2007 Bankruptcy Court order disallowing and expunging forty-four1 Asbestos Property Damage Claims filed by the law firm of Speights & Runyan ("S&R") against W.R. Grace, et al. ("Debtors"). Despite S&R timely filing proof of claim forms on behalf of each Appellant (the forty-four dismissed claimants) and in accordance with the March 31, 2003 bar date set by the Bankruptcy Court, Appellants themselves did not expressly authorize the proofs of claim at issue until after the bar date had passed. The Bankruptcy Court found this post-bar date authorization to be ineffective and thus disallowed and expunged Appellants' claims. Subsequently, Appellants filed this appeal. For the reasons stated below, the Bankruptcy Court's opinion is affirmed.
On December 23, 1992, S&R, a South Carolina law firm, filed suit in South Carolina circuit court on behalf of Anderson Memorial Hospital and against Grace and other manufacturers of asbestos containing materials. The suit sought certification of a nationwide class of private building owners. (Appellees' Br. 10.) In 1994, the South Carolina circuit court issued an order striking out-of-state class members from the Anderson Complaint based on the South Carolina "Door Closing Statute."2 (Appellants' Br. 1; S.C. Code Anno. §15-5-150.) This prompted S&R to file a second amended complaint in 1996 limiting the proposed class to buildings in South Carolina which did not include Appellants. (Appellees' Br. 10.) On February 9, 2001, the South Carolina circuit court entered an ex parte order conditionally certifying the state-wide class.3 (Appellants' Br. 2) Shortly thereafter, on April 2, 2001, Grace filed its Chapter 11 petition.
Following Debtors' filing for bankruptcy, Debtors, the Official Committee of Asbestos Property Damage Claimants (the "PD Committee"),4 and other interested parties worked with the Bankruptcy Court to establish a claims bar date, notice package, and comprehensive system of publication. (Appellees' Br. 4; Appellants' Br. 2.) Due to the complexity of the case, substantial effort was made to develop a proper notice plan. On April 22 2002, the Bankruptcy Court entered the Bar Date Order, setting March 31, 2003 as the bar date for filing Asbestos Property Damage Claims. (Appellees Br. 5.) The Bar Date Order also approved the notice plan negotiated by the PD Committee and the parties, calling for actual notice to roughly 200,000 known asbestos claimants combined with an extensive print media notice program. (Appellees' Br. 4-5). The order also required actual notice to 9700 known asbestos property damage claimants, including all named parties to the handful of property damage cases pending when Grace filed its bankruptcy petition, and all known personal injury and property damage lawyers. (Bankr. Doc. No. 13077, 8/21/06 Tr. at 251-52.) The lawyers were served with the understanding that they would best know of clients who might be interested in filing property damage claims. (Id.)
The original Bar Date Order also "required all counsel of record for Asbestos PD Claimants to either (i) certify that they had contacted or attempted to contact their clients, provided them with the Bar Date Package and advised them regarding their rights to assert a claim against the Debtors before the Bar Date; or (ii) provide Grace with the current names and addresses of their clients who may have claims against Grace, so that Grace could send them the Bar Date Notice Package." (Appellees' Br. 5.) In September 2002, however, the Bankruptcy Court abated the requirement directing counsel for Asbestos PD Claimants to certify their actions, after the Court made clear and the PD committee acknowledged that the attorneys would bear the risk of claimants not receiving actual notice. (Id. at 5-6).
Following the Bar Order, S&R proceeded to file 2,938 asbestos property damage claims, none of which were personally signed by the actual claimants, but were rather signed by Daniel Speights and Amanda Steinmeyer of the S&R firm. In re W.R. Grace & Co., 366 B.R 302, 304 (Bankr. D. Del. 2007). Once the bar date had passed, Debtors thereafter challenged every Proof of Claim filed by S&R as unauthorized, prompting the Bankruptcy Court to issue an Order instructing S&R to "catagorize all of its asbestos property damage claims based, inter alia, upon the authority by which it had filed the claims." (Appellants' Br. 4.) For the forty-four claims at issue here, S&R "provided written authorizations which are either undated or dated after the March 31, 2003 bar date." W.R. Grace, 366 B.R. at 304. Simply put, the proofs of claim were filed prior to the bar date, but S&R did not receive express authorization from Appellants until after the bar date. The Bankruptcy Court entered an order on April 17, 2007 disallowing and expunging these forty-four claims, finding that the post-bar date ratifications by the forty-four Appellants were ineffective as a result of the intervening bar-date deadline. W.R. Grace, 366 B.R. 302. This appeal followed, with Appellants raising the following specific issues:
(1) Did the Bankruptcy Court err in expunging appellants' asbestos property damage claims on the basis that a putative class counsel did not have authority to file the claim on behalf of the claimant who was a member of the putative class?
(2) Did the Bankruptcy Court err in expunging the appellants' asbestos property damage claims on the basis that the appellants were precluded as a matter of law from ratifying a timely proof of claim filed on its behalf by putative class counsel of a class that included the claimant, even where the claimant/class member had received no direct or actual notice of the bar date from the Debtors?
(3) Did the Bankruptcy Court err in expunging the appellants' asbestos property damage claims without an evidentiary hearing or without making specific findings of fact as to when the claimant received actual notice of the bar date?
The Court concludes that: (1) S&R did not have authority to file claims on behalf of Appellants; (2) Appellants' post-bar date express authorizations did not amount to effective ratifications; and (3) Appellants were not known claimants entitled to actual notice.
This Court must accept the Bankruptcy Court's factual determinations unless those determinations are clearly erroneous. See Fed. R. Bankr. P. 8013 (). The Court reviews the Bankruptcy Court's legal decisions de novo. In Re O'Brien Envtl. Energy, Inc., 188 F.3d 116, 122 (3d Cir. 1999).
The issues presented to this Court on appeal go hand in hand. As noted above, the first issue is whether S&R was authorized to file individual claims on behalf of the forty-four Appellants. If so, Appellants' proofs of claim would be timely and valid. If, however, S&R was not authorized to file proofs of claim on Appellants' behalf, the second issue the Court must consider is whether Appellants' subsequent express authorizations apply retroactively to the date of S&R's timely filing, acting as a ratification. Such a determination would also make Appellants' claims timely and valid. On the other hand, if the Court were to find that the ratifications were ineffective, the Court must inquire into whether Appellants were known creditors who did not receive actual notice and therefore are entitled to file their proofs of claim after the bar date. A discussion of each issue follows.
While it is undisputed that S&R timely filed individual proofs of claim on behalf of Appellants, the question remains of whether S&R was an authorized agent of each Appellant under Federal Rule of Bankruptcy 3001(b), thereby giving them the authority to file those individual proofs of claim. Federal Rule of Bankruptcy 3001(b) provides that "[a] proof of claim shall be executed by the creditor or the creditor's authorized agent." "An agent may file a proof of claim only for those individuals who have expressly authorized the agent to do so." In re Standard Metals, 817 F.2d 625, 631 (10th Cir. 1987), vac'd on other grounds, 839 F.2d 1383 (1988). "Rule 3001(b) allows a creditor to decide to file a proof of claim and to instruct an agent to do so; it does not allow an `agent' to decide to file a proof of claim and then inform a creditor after the fact." Id.
Appellants nonetheless argue that S&R's role as putative class counsel in the Anderson Memorial-South Carolina action authorized them to file proofs of claim on behalf of Appellants, despite not having express authority from Appellants in advance. Appellants base their argument on, inter alia, the Seventh Circuit's ruling in In re Am. Reserve Corp., 840 F.2d 487, 493 (7th Cir. 1988), where the Court expressly held that class proofs of claim are permissible in bankruptcy. In reaching this conclusion, the Court explained
[t]he representative in a class action is an agent for the missing. Not every effort to represent a class will succeed; the representative is an agent only if the class is certified. Putative agents keep the case alive pending the decision on certification. If the bankruptcy judge denies the request to certify a class, then each creditor must file an individual proof of claim; the putative agent never obtains "authorized agent" status. If the court certifies the class, however, the self-appointed agent has become "authorized," and the original filing is effective for the whole class (the principals). It follows that there may be class...
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