Mt. McKinley Ins. Co. v. Corning Inc.

• Decision Date: 16 February 2005
• Docket Number: Docket No. 03-7740.
• Citation: 399 F.3d 436
• Parties: MT. McKINLEY INSURANCE COMPANY, f/k/a Gibralter Casualty Co., and Everest Reinsurance Company, f/k/a Prudential Reinsurance Co., Plaintiffs, v. CORNING INCORPORATED, Defendant-Appellee, AIU Insurance Company, Allianz Insurance Company, American Centennial Ins. Co., Century Indemnity Co., as successor-in-interest to the Insurance Company of North America, California Union Ins. Co., the Continental Insurance Company, Employers Insurance of Wausau, Executive Risk Indemnity, Inc., as successor-in-interest to American Excess Insurance Company, Federal Insurance Company, Fireman's Fund Insurance Company, First State Insurance Co., Government Employees Insurance Company a/k/a Geico, Granite State Insurance Company, Great American Insurance Company, Hartford Accident and Indemnity Company, Highlands Insurance Company, the Home Insurance Company, Hudson Insurance Company, Kemper Insurance Company, as successor-in-interest to Lumbermen's Mutual Casualty Company, Lexington Insurance Company, National Union Fire Insurance Company, New England Reinsurance Corporation, a/k/a New England Insurance Company, North River Insurance Company, Old Republic Insurance Company, Pacific Insurance Company, Puritan Excess and Surplus Lines Insurance Company, Republic Insurance Company, Royal Indemnity Company, Westchester Fire Insurance Company, as successor-in-interest to International Insurance Company, Allstate Insurance Company, f/k/a Northbrook Indemnity Company, as successor-in-interest to Northbrook Excess & Surplus Insurance Company, Defendants, American Home Assurance Company, Certain Underwriters at Lloyd's, London, Certain London Market Insurance Companies, Continental Casualty Company, Travelers Casualty & Surety Company, as successor-in-interest to Aetna Casualty & Surety Company, Defendants-Appellants,
• Court: U.S. Court of Appeals — Second Circuit

399 F.3d 436

MT. McKINLEY INSURANCE COMPANY, f/k/a Gibralter Casualty Co., and Everest Reinsurance Company, f/k/a Prudential Reinsurance Co., Plaintiffs, v. CORNING INCORPORATED, Defendant-Appellee,

AIU Insurance Company, Allianz Insurance Company, American Centennial Ins. Co., Century Indemnity Co., as successor-in-interest to the Insurance Company of North America, California Union Ins. Co., the Continental Insurance Company, Employers Insurance of Wausau, Executive Risk Indemnity, Inc., as successor-in-interest to American Excess Insurance Company, Federal Insurance Company, Fireman's Fund Insurance Company, First State Insurance Co., Government Employees Insurance Company a/k/a Geico, Granite State Insurance Company, Great American Insurance Company, Hartford Accident and Indemnity Company, Highlands Insurance Company, the Home Insurance Company, Hudson Insurance Company, Kemper Insurance Company, as successor-in-interest to Lumbermen's Mutual Casualty Company, Lexington Insurance Company,

National Union Fire Insurance Company, New England Reinsurance Corporation, a/k/a New England Insurance Company, North River Insurance Company, Old Republic Insurance Company, Pacific Insurance Company, Puritan Excess and Surplus Lines Insurance Company, Republic Insurance Company, Royal Indemnity Company, Westchester Fire Insurance Company, as successor-in-interest to International Insurance Company, Allstate Insurance Company, f/k/a Northbrook Indemnity Company, as successor-in-interest to Northbrook Excess & Surplus Insurance Company, Defendants,

American Home Assurance Company, Certain Underwriters at Lloyd's, London, Certain London Market Insurance Companies, Continental Casualty Company, Travelers Casualty & Surety Company, as successor-in-interest to Aetna Casualty & Surety Company, Defendants-Appellants,

Docket No. 03-7740.

United States Court of Appeals, Second Circuit.

Argued: September 28, 2004.

Decided: February 16, 2005.

COPYRIGHT MATERIAL OMITTED

M. Miller Baker, McDermott, Will & Emery (Richard B. Rogers and Michael S. Nadel, on the brief), Washington, D.C.; Rodney L. Eshelman and Gretchen A. Ramos, Carroll, Burdick & McDonough LLP, San Francisco, CA., for Defendant-Appellant Continental Casualty Co.

Richard C. Milazzo, Dennis J. McEnery, Mendes & Mount, LLP, New York, NY; H. Lee Godfrey, Neal S. Manne, Max Tribble, Joseph S. Grinstein, Susman Godfrey, LLP, Houston, TX, for Defendants-Appellants London Market Insurers.

Robert F. Cusumano, Robert D. Goodman, Daniel J. Spillane, Debevoise & Plimpton, New York, NY, for Defendant-Appellant Travelers Casualty & Surety Co., as successor-in-interest to Aetna Casualty & Surety Co.

James M. Dennis, Mound, Cotton, Wollan & Greengrass, New York, NY; Michael J. Larin, Lynberg & Watkins, Los Angeles, CA., for Defendant-Appellant Travelers Casualty & Surety Co., as successor-in-interest to American Casualty & Surety Co.

Thomas S. D'Antonio, Ward Norris Heller & Reidy LLP, Rochester, NY, for Defendant-Appellee Corning Incorporated.

Before: CARDAMONE, POOLER, and WESLEY, Circuit Judges.

POOLER, Circuit Judge.

INTRODUCTION

Underlying this appeal are massive asbestos liability claims against appellee Corning, Incorporated ("Corning"), and a company in which Corning owns 50% of the stock, Pittsburgh Corning Corporation ("PCC"). However, the immediate issues are whether a state or federal forum will determine certain insurers' claims that their policies do not cover asbestos claims against Corning and whether we have jurisdiction to review the determination of the United States District Court for the Southern District of New York (Denise L. Cote, Judge) that the claims belong in federal court because they are core to PCC's Pennsylvania bankruptcy proceeding.

The appellants in this procedurally complicated appeal are insurers that issued liability coverage to appellee Corning. Because ten of the policies that appellants issued also provided coverage for Corning's affiliates, we refer to the appellants — Continental Casualty Company, American Home Assurance Company, Travelers Casualty & Surety Company, and the London Market Insurers — as the affiliate insurers.¹

The affiliate insurers wish to have their liability to Corning assessed in New York State Supreme Court while Corning prefers a federal forum. As we explain in more detail below, before we can decide whether this declaratory judgment action, commenced in state court, should be tried there, we must thread our way through issues of appellate jurisdiction, abstention, and bankruptcy law. For the moment, we confine ourselves to a brief outline of the procedural history of this appeal and the issues it presents.

Corning owned half the stock in PCC. In 2000, asbestos-related liability claims forced PCC into bankruptcy. In 2002, in a New York state court, two of Corning's insurers, Mt. McKinley Insurance Company ("Mt.McKinley") and Everest Reinsurance Company ("Everest"), brought a declaratory judgment action against Corning and all of Corning's excess insurers including appellants. Mt. McKinley and Everest sought a declaration that they owed no liability to Corning for asbestos claims whether those claims stemmed from Corning's activities or from PCC's. Corning removed the lawsuit to the United States District Court for the Southern District of New York and sought transfer to the Western District of Pennsylvania where PCC's bankruptcy proceeding was pending. The insurers, both plaintiffs and defendants, moved for a remand, arguing that mandatory abstention pursuant to 28 U.S.C. § 1334(c)(2) applied because they had commenced a lawsuit in state court and their claims against Corning were not core to PCC's bankruptcy proceeding.

The district court remanded claims against those insurers whose policies specifically excluded PCC from coverage, but held that because the affiliate insurers' policies could potentially cover PCC, claims against these insurers were core to the Pennsylvania bankruptcy proceeding and abstention was neither required nor appropriate. The court also stayed adjudication of the affiliate claims pending resolution of an adversary action between PCC and the affiliate insurers in Pennsylvania.

The affiliate insurers appeal from the district court's order, and Corning moves to dismiss the appeal. Corning principally contends that the district court's order is neither final nor within our collateral order jurisdiction. Because the district court's order finally and conclusively determined the important collateral issue of whether the affiliate policy claims will be adjudicated in state or federal court, we have jurisdiction under the collateral order doctrine. Because resolving Corning's entitlement to coverage from its insurers is not core to PCC's reorganization proceedings, we vacate the district court's order and remand for a determination of whether the issues in this lawsuit can be speedily resolved in state court. See 28 U.S.C. § 1334(c)(2).

BACKGROUND

Corning and PPG Industries, Inc., ("PPG") are equal owners of PCC. Between 1962 and 1972, PCC manufactured and sold Unibestos(R), which contains asbestos. Corning also produced an asbestos-containing product, Corhart. Thousands of individuals allegedly injured by Unibestos(R) have sued both PCC and Corning. Others have sued Corning based on their exposure to Corhart.

On April 16, 2000, PCC filed a voluntary Chapter 11 petition in the Bankruptcy Court for the Western District of Pennsylvania. On May 14, 2002, PCC announced a plan of reorganization that included a $2.7 billion trust for asbestos claimants. According to the plan, both PPG and its insurers would contribute to this fund. The plan did not include contributions from Corning's insurers. Nor was Corning a party to the plan or the bankruptcy proceeding.

In May 2000, PPG filed an adversary proceeding in bankruptcy court against its insurance carriers, including some of the carriers who are defendants in this lawsuit.

On July 3, 2002, Mt. McKinley and Everest, two of Corning's excess carriers, filed a declaratory judgment action in New York County Supreme Court against Corning and all of the insurers that provided commercial general liability coverage for Corning between 1962 and 1985. Mt. McKinley and Everest sought a declaration that they had no obligation to provide coverage for Corning with respect to Unibestos(R) or Corhart.² They also sought a declaration of their rights and obligations in relation to the defendants including the affiliate insurers. The aggregate value of the "affiliate policies" issued by the affiliate insurers is $225 million.

On July 24, 2002, Corning removed the Mt. McKinley lawsuit from state supreme court. The next day Corning filed an adversary proceeding against the same insurers in the bankruptcy court. Within the adversary proceeding, Corning sought a declaration of its rights in each of the policies. Within the removed proceeding, Corning requested a transfer to the Western District of Pennsylvania, dismissal of all proceedings for failure to join PCC as a necessary party, or a stay of all proceedings. The insurers moved for a remand to state court or abstention, contending that (1) the district court lacked subject matter jurisdiction; (2) the court was required to abstain; (3) the court should exercise its discretion to abstain; and (4) remand was required because Corning's removal procedures were defective.

In a March 21, 2003, opinion and order, the district court found that it had subject matter jurisdiction over the affiliate insurers' claims because these proceedings were core to PCC's reorganization in the Western District of Pennsylvania. The claims against and by the affiliate insurers were "core" because:

it is undisputed that indemnification insurance is crucial to PCC's ability to reorganize. A determination regarding the availability of the $225 million from the ten Affiliate Policies will be material to that reorganization...