Chapter 11: In Re Johns-Manville Corp.

U.S. Court of Appeals, Second Circuit

Chapter 11

Due Process — Notice of Order

In Re Johns-Manville Corp.
06-2103-bk
Appealed from the Southern District of New York

Background: For almost 30 years, the Johns-Manville Corp. and its insurers have been navigating the monumental liability arising out of its production of asbestos. The appeals are yet another judicial stop on a long journey. The current matter before the court is on remand from the U.S. Supreme Court, which determined the bankruptcy court’s 1986 orders in Manville’s Chapter 11 proceedings, “whether or not proper exercises of bankruptcy court jurisdiction and power,” are not subject to collateral attack either by the parties to the 1986 proceedings or by those in privity with them. The Second Circuit was directed to address the parties’ remaining arguments. As the U.S. Supreme Court suggested, the primary current contention is Chubb Indemnity Insurance Co.’s argument that “it was not given constitutionally sufficient notice of the 1986 orders, so that due process absolves it from following them, whatever their scope.”

Ruling: The court agrees with Chubb Indemnity. In the midst of the great complexity of the underlying bankruptcy proceedings, Chubb was not afforded constitutionally sufficient notice of the proceedings that led to the entry of the 1986 orders by the bankruptcy court. Chubb also was not adequately represented in the proceedings that led to the approval of the 1984 insurance settlement agreement and the Manville Plan. As such, Chubb is not bound by the bankruptcy court’s 2004 interpretation of those orders. Accordingly, the district court’s order is reversed as to Chubb, and the case is remanded for further proceedings.

Sander L. Esserman of Stutzman, Bromberg, Esserman & Plifka PC for appellant asbestos personal injury claimants, and Barry R. Ostrager of Simpson Thatcher & Bartlett LLP for appellee Travelers Casualty and Surety Co.