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IN RE G-I HOLDINGS

December 7, 2005.

In re: G-I HOLDINGS, INC. f/k/a GAF CORPORATION, Debtor. G-I HOLDINGS, INC. f/k/a GAF CORPORATION and BUILDING MATERIALS CORPORATION OF AMERICA, Plaintiffs,
v.
RUDDLES A. BENNET, JR. et al., Defendants.



The opinion of the court was delivered by: WILLIAM BASSLER, District Judge

OPINION

Plaintiffs, G-I Holding Inc. ("G-I"), a debtor in bankruptcy proceedings, and its nonbankrupt subsidiaries filed an adversary proceeding seeking a declaration that the subsidiaries could not be held liable for asbestos-related claims under successor liability or alter ego theories. On July 6, 2005, this Court dismissed the Legal Representative of Present and Future Holders of Asbestos-Related Demands ("Legal Representative")from the action finding that his involuntary participation in the matter is not statutorily authorized and would be an abuse of his role. Plaintiffs bring the current motion requesting the Court to direct entry of that order ("July 6 Order") as final or, in the alternative, certify the order for interlocutory appeal.

The Court properly exercises jurisdiction over this matter pursuant to 28 U.S.C. §§ 1334(b) and (e). Venue is proper in this district pursuant to 28 U.S.C. § 1409(a).

  For the reasons set forth below, the Court denies Plaintiffs' motion.

  I. Background

  Plaintiff G-I, the successor to GAF Corporation, is a holding company, which filed for Chapter 11 bankruptcy on January 5, 2001. (First Amended Complaint ("First Am. Compl.") ¶¶ 2,5). GAF was a building materials company that produced asbestos products. GAF has been named in 500,000 asbestos lawsuits and G-I remains liable for approximately 150,000 claims that have been filed and for unknown numbers of asbestos claims that will be filed in the future. Due to the massive liability it faced, G-I claims that it was forced to file for bankruptcy. (Id. ¶ 4).

  G-I is the parent company of Plaintiffs Building Materials Corporation of America, Building Materials Investment Corporation and Building Materials Manufacturing Corporation (collectively "BMCA"). BMCA is a leading manufacturer of roofing and building products. Established in 1994, BMCA received substantially all assets of GAF's products business and expressly assumed $204 million of asbestos liability with G-I indemnifying BMCA against additional asbestos liability. In re G-I Holdings, Inc., 323 B.R. 583, 588 (Bankr D.N.J. 2005) (citing In re G-I Holdings, Inc., 313 B.R. 612, 621 (Bankr. D.N.J. 2004)). Approximately 2,500 state law actions were filed pre-petition against BMCA alleging asbestos-related claims under theories of "successor liability" and/or "alter ego" between G-I and BMCA (First Am. Compl. ¶ 3).

  Shortly after G-I filed for chapter 11 bankruptcy protection, the United States trustee appointed the Official Committee of Asbestos Claimants (the "Committee") to represent present asbestos claimants or individuals exposed to G-I's asbestos products pre-petition who had manifested an asbestos related injury prior to plan confirmation. The Bankruptcy Court later appointed C. Judson Hamlin as the Legal Representative to protect the interests of those individuals currently unknown to the parties that have not yet manifested an asbestos-related injury but may hold future claims.

  On February 7, 2001, Plaintiffs filed an action seeking a declaration that BMCA was not liable for asbestos claims under successor liability and/or alter ego theories. Plaintiffs initiated the suit against six individual asbestos claimants ("Individual Defendants")*fn1 on behalf of themselves and all others similarly situated, including all future asbestos claimants. (Id. at 1). The Bankruptcy Court granted the Committee's request to intervene in November 2001. In October 2002, Plaintiffs amended their complaint to drop the class action allegations and to add the Legal Representative as a defendant. The Legal Representative then moved for a judgment on the pleadings, claiming that Plaintiffs were not entitled to relief because: "1) BMCA may not use the Declaratory Judgment Act to obtain a preemptive declaration of non-liability based on state law defenses; 2) the action does not involve a controversy of sufficient immediacy; and 3) Plaintiffs may not seek relief under the Declaratory Judgment Act because Congress has enacted a statute that provides for the specific relief requested." In re G-I Holdings, Inc., 328 B.R. 691, 694 (D.N.J. 2004).

  In the meantime, the Committee commenced an avoidance action in the Southern District of New York alleging that G-I's predecessor effected a fraudulent transfer of assets to its shareholders, including Samuel Heyman. In May 2003, over G-I's strenuous objection, the Bankruptcy Court granted the Legal Representative's motion to intervene in the Committee's avoidance action against Mr. Heyman. In re G-I Holdings, Inc., 292 B.R. 804, 815 (Bankr. D.N.J. 2003).

  In its July 6 Order, this Court ruled in favor of the Legal Representative solely on ground three, finding that the forced participation of the Legal Representative is not statutorily authorized and will distort the statutory function of the Legal Representative provided under 11 U.S.C. § 524(g). 328 B.R. at 691. The Court rejected the argument that the Bankruptcy Court's decision allowing the Legal Representative to intervene in the New York avoidance case "confer[s] upon Plaintiffs the power to conscript the Legal Representative as an unwilling defendant in this action." 328 B.R. at 696. The Court reasoned that, because the Legal Representative is a creation of 11 U.S.C. § 524(g), he has no role in this "essentially . . . nonbankruptcy action to determine whether BMCA, a non-debtor, carries successor liability from G-I and is therefore liable to asbestos claimants." Id. It further held that Plaintiffs' attempt to bypass the safeguards provided under Federal Rule of Civil Procedure 23 by dismissing its class action claims and § 524(g), which each protect the rights of future claimants, was a violation of due process. Plaintiffs now ask the Court to certify as a final judgment or certify for interlocutory appeal its ruling that the Legal Representative is an inappropriate party in this matter so that Plaintiffs may immediately obtain appellate review of the Court's decision.

  II. Discussion

  A. Rule 54(b)

  The Court of Appeals has jurisdiction to review only "final decisions" of the district court under 28 U.S.C. § 1291. In re Diet Drugs Products Liability Litigation, 401 F.3d 143 (3d Cir. 2005). Although an order that disposes of fewer than all claims or the rights and liability of fewer than all parties is normally not appealable, an exception to the general rule exists when an order is certified as appealable by a district court pursuant to Federal Rule of Civil Procedure Rule 54(b). Id. at 162. Rule 54(b) permits the district court to separate final decisions from non-final decisions in multiple party or multiple ...


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