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IN RE G-I HOLDINGS

December 7, 2005.

In re: G-I HOLDINGS, INC. f/k/a GAF CORPORATION, et al. Debtor.


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

OPINION

Debtor, G-I Holdings Inc. ("G-I"), moved to appeal the Bankruptcy Court's July 14, 2005 order ("July 14 Order") denying G-I's application for an order pursuant to 11 U.S.C. § 502(c) establishing a method to liquidate individual asbestos claims. The Legal Representative of Present and Future Holders of Asbestos-Related Demands ("Legal Representative"), being joined by the Official Committee of Asbestos Claimants ("Committee"), now moves to dismiss G-I's appeal on the basis that the Bankruptcy Court's July 14 Order was not final. The Legal Representative and Committee further submit that G-I's appeal should not be converted into a notice of motion for leave to appeal an interlocutory order.

I. BACKGROUND

  A. General History

  G-I, the successor to GAF Corporation ("GAF"), filed for chapter 11 bankruptcy on January 5, 2001 and continues to operate as a debtor in possession. GAF was a building materials company that produced asbestos products. An affiliate of G-I, ACI, also commenced a chapter 11 case, and the two cases are being administered jointly.

  GAF has been named in 500,000 asbestos claims and both GAF and G-I have paid over $750 million to asbestos plaintiffs over the past seven years. G-I remains liable for approximately 150,000 asbestos lawsuits that have been filed and for unknown numbers of asbestos claims that will be filed in the future. In fact, G-I claims that it was forced to file for bankruptcy due to an increase in both the number of asbestos claims filed against it and the settlement amounts demanded by asbestos claimants.

  Building Materials Corporation of America ("BMCA"), a leading manufacturer of roofing and building products, is an indirect subsidiary of G-I and is also the primary operating subsidiary and principal asset of G-I. 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)). No asbestos claims were filed against BMCA until G-I was in danger of filing for bankruptcy. Claimants then began naming BMCA as a defendant according to theories of successor liability and alter ego liability.

  Shortly after G-I filed for chapter 11 bankruptcy protection, the United States trustee appointed 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 on January 18, 2001. On October 10, 2001, C. Judson Hamlin was appointed by the Bankruptcy Court 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.

  B. May 13 Order Denying Motions to Withdraw Reference

  On May 23, 2002 the Committee filed a motion in this Court for partial withdrawal of reference as to G-I's application for estimation of claims under 11 U.S.C. § 502(c). Subsequently, G-I filed its Estimation Motion on June 19, 2002.*fn1 The Legal Representative filed its own motion to withdraw reference of G-I's application for an estimation on August 9, 2002. On May 13, 2003, the Court denied the motions to withdraw the reference on the basis that "judicial economy is . . . better served by having the Bankruptcy Court retain jurisdiction of the estimation process." Official Committee of Asbestos Claimants v. G-I Holdings, Inc. (In re G-I Holdings Inc.), 295 B.R. 211, 218-220. The Court reasoned that given the Bankruptcy Court's understanding of the facts and issues in the case and the knowledge of the chapter 11 reorganization process the Bankruptcy Court should "attempt the estimation proceeding in the first instance." Id. (emphasis added).

  C. The Bankruptcy Court's July 14 Decision

  After G-I filed its Estimation Motion on June 19, 2002, the Committee and the Legal Representative filed their objections to the motion on August 30, 2002 and September 2002, respectively. The Committee also filed a competing motion on May 23, 2002. While G-I's motion proposed a novel method of estimating individual personal injury claims, the Committee sought an order from the Bankruptcy Court approving a process that would estimate G-I's asbestos liability in the aggregate. G-I proposed a detailed and intricate scheme whereby all asbestos personal injury claims asserted against its estate would be liquidated through the application of a medical matrix, which G-I developed. 323 B.R. at 590. In addition, a Claims Liquidation Committee ("CLC") would be charged with the responsibility of administering the claims procedures established by G-I. The Committee objected on the basis that the medical matrix and claims liquidation procedures actually amount to an improper liquidation of all personal injury claims for the purpose of determining actual distributions to persons whose claims are allowed. As a result, the Committee and Legal Representative submit that G-I's "liquidation-by-estimation scheme" would violate asbestos claimants' rights because it would determine final values for individual claims, for purposes of distribution under the reorganization plan, without affording claimants any right to a jury trial. 323 B.R at 600. G-I concedes that the asbestos claimants would not receive a jury trial under its plan.

  The Bankruptcy Court agreed with the Committee and the Legal Representative, and ruled that the claims held by the asbestos claimants are "legal in nature," and therefore, carry with it the Seventh Amendment's guarantee of a right to a jury trial. 323 B.R. at 606 (citing Granfinanciera v. Nordberg, 492 U.S. 33, 55 (1989)). Additionally, the Bankruptcy Court held that G-I's motion further violated 28 U.S.C. § 1411, which provided that neither title 11 nor chapter 87 of title 28 should affect a jury trial right. The Bankruptcy Court also ruled that the appointment of the CLC to determine individual claims violated clear statutory mandates. 323 B.R. at 607, 614-16 (citing 28 U.S.C. § 157 and Fed.R.Bankr.P. 9031)). The Bankruptcy Court instead granted the Committee's motion to estimate G-I's asbestos liability in the aggregate, but rejected its request to set up a trust under § 524(g). More importantly to the current motion, the Bankruptcy Court did not estimate the actual value of any claims against G-I or allow or disallow any asbestos claims. In fact, the Court left open certain aspects of the proper estimation procedure, including the methodology to estimate asbestos liability in the aggregate.

  G-I filed a notice of appeal pursuant to Bankruptcy Rule 8002(a) on July 25, 2005 purporting to appeal to this Court under 28 U.S.C. § 158(a) from the portion of the July 14 Order denying G-I's Estimation Motion. In the Bankruptcy Court, G-I argued that the lack of a right to jury trial does not affect the viability of the medical matrix and the claims liquidation procedures because asbestos-related personal injury claimants have no constitutional or statutory right to a jury trial in the context of a bankruptcy proceeding. 323 B.R. at 601. The Legal Representative, joined by the Committee, move to dismiss the appeal on the basis that the Court does not have subject ...


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