United Ref. Co. v. Dorrion
| Docket Number | Civil Action 4:21-cv-00355 |
| Decision Date | 23 August 2023 |
| Parties | UNITED REFINING COMPANY, Debtor, v. ROBERT W. DORRION, Appellant. |
| Court | U.S. District Court — Southern District of Texas |
CHARLES ESKRIDGE JUDGE
Appellant Robert W. Dorrion is executor of the estate of Gerald W Dorrion. He appeals from an order of the United States Bankruptcy Court determining that a wrongful-death claim he brought against Appellee United Refining Company was discharged in bankruptcy.
The decision of the bankruptcy court is affirmed but subject to limited remand for consideration whether an argument by Appellant was forfeited for failure to raise it before the bankruptcy court-and if not, to decide that issue as noted below.
Gerald W. Dorrion worked for United Refining Company from 1960 to 1963 and was allegedly exposed to asbestos at one of its petroleum refineries in Pennsylvania. He will be referred to here as the Decedent because, unfortunately, he was diagnosed with mesothelioma-an aggressive form of cancer caused by asbestos exposure-in 2016 and died the following year.
Robert W. Dorrion served as executor of the Decedent's estate and will be referred to here as such. His familial relationship with the Decedent, if any, isn't clear from the record. Regardless, in 2018, the Executor brought a wrongful-death action against United Refining in Pennsylvania state court.
In 1983, United Refining had filed for Chapter 11 bankruptcy in the Southern District of Texas. It submitted its sixth amended reorganization plan in 1988. See Dkt 8-3. As relevant to this appeal, the plan discharged “all Claims arising before the Confirmation Date.” Id. at 57. It thus barred creditors from asserting claims against United Refining “based upon any act or omission . . . that occurred prior to the Confirmation Date.” Id. at 58.
The bankruptcy court confirmed the plan by order in 1988. Dkt 8-4. That order likewise included language discharging United Refining of debts that arose before entry of the order. Dkt 8-4 at 9-10 ¶ 6. It stated further that the United Refining estate was free of all claims of creditors; any judgment of liability on a discharged claim would be null and void; and any action to recover on a prepetition debt was forever enjoined. Id. at 10-11 ¶¶ 7-9. It also provided that the plan bound all creditors, regardless of whether they accepted the plan or whether the plan impaired their claims. Id. at 13 ¶ 19. And it stated that United Refining “complied with the applicable notice provisions of the Bankruptcy Code, the Bankruptcy Rules and the Local Rules of Court, and notice of the hearing on confirmation was reasonable and appropriate.” Id. at 8 ¶ 1.
The bankruptcy case closed once the confirmed reorganization plan was consummated. The official record of the case was destroyed in the ordinary course of court business in 2020.
United Refining initially defended itself in Pennsylvania state court when the Executor asserted the subject wrongful-death claim in May 2018. But it later moved to reopen its bankruptcy case in July 2020. Dkt 2 at 11. The motion was granted. Id. at 418. United Refining then moved for the bankruptcy court to determine whether the asbestos-related claim brought by the Executor was discharged by the 1988 confirmation order. Id. at 424. As just noted, the materials available for review on this motion were limited due to the destruction of the case-related files. Only the plan, confirmation order, and a few post-confirmation orders were (and are) available for consideration. Unavailable are items such as the entries in the docket, affidavits of service, the disclosure statement, any schedule of assets and liabilities, or any evidence from the Decedent himself about his notice of or knowledge about the bankruptcy case. See Id. at 880.
On the briefing and available materials, the bankruptcy court concluded that the claim was discharged. Judge Christopher M. Lopez first determined that the Executor had brought a prepetition claim within the meaning of the Bankruptcy Code. Id. at 882-86. He then determined that the Bankruptcy Code and confirmation order discharged the wrongful-death claim and enjoined the Executor from further litigating the claim. Id. at 88690. With reliance upon the confirmation order's finding that notice was adequate, Judge Lopez also concluded that the Decedent had received adequate notice of the bankruptcy case. Id. at 887-89.
The Executor appealed. Id. at 891.
Federal district courts have jurisdiction to hear appeals from final judgments or orders of the bankruptcy courts. 28 USC § 158(a)(1). A district court functions as an appellate court when reviewing the decision of a bankruptcy court as to a core proceeding, and so applies the same standard of review as would a federal appellate court. See In re Webb, 954 F.2d 1102, 1103-04 (5th Cir 1992). Findings of fact are thus reviewed for clear error, while conclusions of law and mixed questions of fact and law are reviewed de novo. In re Seven Seas Petroleum Inc, 522 F.3d 575, 583 (5th Cir 2008); see also Fed R Bankr P 8013. But matters within the discretion of a bankruptcy court are reviewed only for abuse of discretion. In re Gandy, 299 F.3d 489, 494 (5th Cir 2002).
A bankruptcy court abuses its discretion when it applies an improper legal standard or bases its decision on clearly erroneous findings of fact. In re Crager, 691 F.3d 671, 675 (5th Cir 2012). And on review of purported abuse of discretion, the district court “may affirm if there are any grounds in the record to support the judgment, even if those grounds were not relied upon” by the bankruptcy court. In re Green Hills Development Co, 741 F.3d 651, 656 n 17 (5th Cir 2014) (citations omitted).
On appeal, the Executor argues that the bankruptcy court erred by determining that (i) the claim now brought against United Refining existed before the 1983 bankruptcy filing, (ii) the Decedent was given adequate notice of the need to file a claim in the 1983 bankruptcy case, and (iii) the claim was discharged by United Refining's reorganization plan. The Executor also argues that the court abused its discretion by (iv) deciding to reopen the long-closed bankruptcy case.
None of these is ultimately persuasive.
The Executor dedicates the better part of his brief to arguing that no cognizable claim existed as of 1983, when United Refining filed its bankruptcy petition. Dkt 8 at 1026. It's undisputed that the Decedent was exposed to asbestos before the filing date. The primary question is whether that's enough for the claim that the Executor now asserts to be considered a prepetition claim, even though the Decedent's mesothelioma manifested itself decades later. If no claim existed prepetition, then neither the Bankruptcy Code nor the confirmation order will have discharged that claim, and it may proceed.
As a preliminary matter, the Executor suggests that the law to be applied in determining whether the Decedent had a prepetition claim is the law as it existed at the time of the bankruptcy filing in 1983. See Dkt 8 at 10-11. Neither the bankruptcy court nor United Refining directly address this contention. There is some support for it in the caselaw, which notes due-process concerns arising from retroactive application of law. For example, see In re Placid Oil Co, 753 F.3d 151, 154 n 1 (5th Cir 2014), citing Wright v Owens Corning, 679 F.3d 101 (3d Cir 2012). But whether new or old law applies, it's clear that the Decedent had a dischargeable, prepetition claim-especially since the broad definition of claim in the Bankruptcy Code has remained constant throughout.
Section 101(5) of the Bankruptcy Code defines a claim as 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.” This same definition existed as of the 1983 bankruptcy filing, although then situated at Section 101(4).
The Code's definition of claim is of its nature quite broad, having replaced a much narrower one from the 1898 Bankruptcy Act, which the Code supplanted in 1978. See In re Mooney Aircraft Inc, 730 F.2d 367, 375 n 6 (5th Cir 1984); see also In re Johns-Manville Corp, 57 BR 680, 68688 (Bankr SDNY 1986) (). Courts have since formulated tests for determining whether certain tort claims meet the definition of claim under the Bankruptcy Code. These include (i) the accrual test, (ii) the fair-contemplation test, (iii) the conduct test, and (iv) the prepetition-relationship test. See In re Placid Oil Co, 463 BR 803, 814 (Bankr ND Tex 2012) (describing these tests), affd, 753 F.3d 151.
The Executor primarily argues that either the accrual or the fair-contemplation test should apply, and that his wrongful-death claim doesn't qualify as a prepetition claim under either. Dkt 8 at 21-26. But neither of these governs in the Fifth Circuit-nor did they in the 1980s.
Under the accrual test, a claim accrues for bankruptcy purposes when it accrues under applicable non-bankruptcy law. The Executor argues that the subject wrongful-death claim didn't accrue under Pennsylvania law until the Decedent received his mesothelioma diagnosis, meaning further that the claim didn't exist prepetition and thus wasn't discharged. Dkt 8 at 22. Even assuming that accurately states the law as to accrual of claims in Pennsylvania, the accrual test was adopted circuit-wide only in the Third Circuit and has since been overturned as in conflict with the Code's broad definition of claim. See Matter of M. Frenville Co Inc, 744 F.2d 332 (3d...
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