UNARCO BLOOMINGTON FACTORY v. UNR Industries
| Decision Date | 06 December 1990 |
| Docket Number | 90 C 2180.,No. 89 C 5220,89 C 5220 |
| Citation | 124 BR 268 |
| Parties | UNARCO BLOOMINGTON FACTORY WORKERS, Appellants, v. UNR INDUSTRIES, INC., Unarco Industries, UNR, Inc., UNR-Rohn, Inc. (Alabama), UNR-Rohn, Inc. (Indiana), Jobal Tube Co., Inc., and Folding Carrier Corp., Debtors (Two Cases). |
| Court | U.S. District Court — Northern District of Illinois |
COPYRIGHT MATERIAL OMITTED
COPYRIGHT MATERIAL OMITTED
Pamela S. Hollis, Hollis and Johnson, Chicago, Ill., J. William Cuncannan, DeFrees & Fiske, Chicago, Ill., Kevin Forde, Kevin Forde Ltd., Chicago, Ill., James P. Hemmer, Bell, Boyd & Lloyd, Chicago, Ill.
Malcolm M. Gaynor, Richard M. Bendix, Schwartz, Cooper, Kolb & Gaynor Chartered, Chicago, Ill., James Walker, James Walker, Ltd., Bloomington, Ill., Clifford Meacham, U.S. Trustee, Chicago, Ill., Neal L. Wolf, Janet C. Baer, Winston & Strawn, Chicago, Ill.
The appellants, Bloomington Factory Workers ("Workers"), have appealed from certain orders entered by the bankruptcy court pertaining to the reorganization of the debtors. We have before us the Workers' appeal from the entry of an injunction order by the bankruptcy court, and motions to dismiss as moot the Workers' appeal from the confirmation order and two orders of the bankruptcy court approving a trust agreement and claims resolution procedure and requiring claimants to follow procedures established by the Trust for resolution of claims prior to bringing any action in court to liquidate values of claims.
On July 29, 1982, UNR Industries, Inc., and ten of its subsidiaries and affiliates filed voluntary petitions for reorganization under Chapter 11 of the Bankruptcy Code ("the Code"), 11 U.S.C. §§ 101 et seq. The cases were consolidated for procedural purposes. The principal reason stated by UNR for the filing of the bankruptcy petitions was their involvement as defendants in over 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. Uncertainty as to the extent of these potential liabilities, exacerbated by the refusal of UNR's product liability insurance carriers to defend and indemnify UNR in the asbestos litigation, allegedly placed UNR in an untenable financial position with its institutional lenders. Thus, UNR sought the protection of Chapter 11.
Much had transpired in the courts since July of 1982 in arriving at a viable plan of reorganization, but at last, on June 1, 1989, the bankruptcy court entered an order confirming UNR's Plan of Reorganization ("Confirmation Order"). Under the Plan, UNR will pay in full all workers' compensation, administrative and secured claims, as defined in the Plan. UNR's trade creditors and stockholders will receive approximately 37% of new UNR stock issued in accordance with the Plan for claims held prior to UNR's bankruptcy. Prepetition UNR stockholders will retain about eight percent of the company plus receive warrants to purchase more shares at a price fixed slightly higher than market for the stock prior to confirmation of UNR's Plan.
Victim's of asbestos disease are placed in a separate class of individuals for which the Plan makes provision. The class includes asbestos victims who know they have claims against UNR. It also incorporates those who may have been exposed to UNR's asbestos products before the bankruptcy, before confirmation, or after confirmation, but do not yet have an injury or know they have an injury ("Future Claimants"). These individuals do not receive stock directly from UNR. Instead, 63 or 64% of the total of newly issued shares is to be distributed to a trust ("Trust") with the announced purpose of liquidating and paying a portion of both existing claims as well as any claims that may arise in the future as a result of asbestos related injuries. None of these asbestos disease victims will be fully compensated for their injuries. Existing claims will be paid on a pro rata basis. In addition, once an existing claim is liquidated and the Trustees determine the amount to be awarded, they must hold back a portion of the award to ensure that all present and future claimants receive a similar percentage of their claims.
In conjunction with entry of the Confirmation Order on June 1, 1989, the bankruptcy court also entered an order ("Injunction Order") which permanently enjoins all present and future asbestos health claimants from taking any action, directly or indirectly, for the purpose of collecting, recovering or receiving payment of an asbestos disease claim against UNR or any insurance company that settles with UNR. The Injunction was designed as a supplement to the statutory injunctive provisions of Section 524 of the Bankruptcy Code, principally to protect New UNR's stock from being adversely affected as a result of suits by Future Claimants against the reorganized company.
On May 25, 1989, just prior to entry of the Confirmation Order, the bankruptcy court granted application for the approval of the UNR Asbestos-Disease Claims Trust. The Workers' original appeal from that order was dismissed as premature because the Trustee nominees had refused to accept the Trust as approved and therefore the trust arrangement had to be modified and a new trust proposed. It was not until February 22, 1990, that the bankruptcy court entered two orders, one approving the Trust Agreement and Claims Resolution Procedures, and the other requiring claimants to follow the procedures established by the Trust for the resolution of claims prior to bringing any action in court to liquidate values of claims ("Trust Orders"). On February 23, 1990, the Trustees executed the Trust Agreement and assumed their duties as Trustees. They have met on several occasions since that date and have taken a series of measures to implement the Trust.
The Workers are individuals, or their representatives, who were employed at the UNARCO plant in Bloomington, Illinois. This plant manufactured asbestos products from the early 1950's through 1970. All of the workers were diagnosed as suffering asbestos disease from their exposure to asbestos inside the UNARCO plant. Although the Workers were employees of Unarco and suffered asbestos-related injuries as a result of their exposure to asbestos in the course of their employment, there is dispute as to whether their claims against the estate are Class 5 Asbestos-Disease Claims, subject to the Trust, or Class 2 Workmen's Compensation Claims, or both. See UNR Response at 21, 36 n. 18 (); Workers' Brief at 23 (); Workers' Reply at 19 ().1
The Workers have appealed from the Injunction, Confirmation, and Trust orders. The Injunction Appeal is before us on the merits. Prior to a briefing on the merits of the other two appeals, however, UNR has moved to dismiss the appeal from the Confirmation Order as moot and the Trustees of the UNR Asbestos-Disease Claims Trust have moved to dismiss the appeal from the Trust Orders as moot.
The Workers' challenge the June 1, 1989 Injunction Order on the following grounds. The Workers maintain that the bankruptcy court did not have subject matter jurisdiction to enter an injunction binding future claimants and that such an injunction, to the extent it purports to adjudicate the rights of persons who do not yet possess claims, violates Article III of the Constitution which limits federal court jurisdiction to actual "Cases and Controversies." The Workers also contend that the bankruptcy court lacked the power to enter the Injunction insofar as it bars the Workers from recovering under workers' compensation bonds, policies and funds pledged to the State. The Workers further claim that the bankruptcy court had no authority under Section 105 or in equity to enter the injunction because 1) the Injunction violates state criminal laws forbidding employers from restraining employees from pursuing their rights under workers' compensation laws; 2) the Injunction conflicts with Section 524(e) of the Bankruptcy Code by discharging the claims of nondebtors; and 3) the Injunction impermissibly channels claims to a limited fund without preserving priorities to that fund. Finally, the Workers argue that, based on the evidence, the issuance of the Injunction was clearly erroneous.
UNR and several of the amici that filed briefs in opposition to the Workers' Injunction Appeal first contend that the Workers lack standing to challenge the Injunction Order. UNR relies on the principle that a person who seeks to appeal an order of the bankruptcy court must be directly and adversely affected pecuniarily by it. Kane v. Johns-Manville Corp., 843 F.2d 636, 641 (2d Cir.), cert. denied, MacArthur v. Johns-Manville Corp. 488 U.S. 868, 109 S.Ct. 176, 102 L.Ed.2d 145 (1988). UNR maintains that the specific challenges raised by the Workers as grounds for their appeal relate only to rights and interests of the future claimants. UNR therefore seeks dismissal of the Workers' entire appeal as an impermissible assertion of the future claimants' rights by the Workers, as opposed to the assertion of their own interests.
In response, the Workers correctly point out that UNR has overstated its premise for dismissal of the entire appeal since several of the Workers' challenges clearly relate to the Injunction's direct affect on their own economic interest. These challenges derive from the Injunction's regulation of the Workers' pursuit of workers' compensation claims and civil suits against New UNR and...
To continue reading
Request your trial
-
In re Hunt
... ... by professionals in this circuit are those adopted in Cle-Ware Industries, Inc. v. Sokolsky, 493 F.2d 863 (6th Cir.1974), cert. denied 419 U.S. 829, ... ...