A new article by Russel Prugh from Marten Law caught my eye because it explained that the federal circuit courts are now embracing a rule that permissive ointervention rules and CERCLA protect the contribution claim rights of allegedly responsible co-defendants. These ruliings stand in contrast to some asbestos bankrutpcy rulings that fail to protect the rights of co-defendants. The article focuses on a recent opinion, United States v. Aerojet General Corp., No. 08-55996, — F.3d —, 2010 WL 2179169 (9th Cir. June 02, 2010).
Why does this subject matter ? Because in some but not all mass torts, there are many potentially responsible parties that caused an indivisible harm. Think BP oil rig. Think asbestos litigation. Upon scrutiny of any real depth, it seems pretty obvious that there is no valid logic to respecting contribution claim rights in some mass tort settings, but not in bankruptcy court. Simply put, there cannot be a sound public policy that says that people who screw up a business through bad judgments should be protected from paying for physical injuries and property damage they caused through their bad judgments. Indeed, one can pretty easily argue that tort claimants and co-defendant are both involuntary creditors who should recevie more protection than do voluntary creditors.
The entire article and opinion should be read. But, for now, here are two key excerpts (text of footnotes omitted) to whet the appetite. Note especially the second quoted paragraph, and consider an analogy to the fairness of chapter 11 "pre-packs" in which the asbestos persoanl injury creditors and the debtor already have cut a deal. The key quotes are:
The Ninth Circuit panel rejected the reasoning of the Aerojet district court and a 2004 Ninth Circuit district court ruling, once thought to be in line with the majority view, holding that the contribution right was insufficient to permit intervention under CERCLA.[27] These decisions focused on two broad themes: (1) the contribution right under CERCLA was a “contingent” or “speculative” interest that would not support intervention;[28] and (2) intervention for non-settling parties was inappropriate under CERCLA Section 113(i) because CERCLA’s legislative history and underlying policies supported denying intervention.[29]
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The Ninth Circuit also briefly addressed whether CERCLA’s notice and comment procedure for consent decrees provides non-settling PRPs with a means to adequately protect their interests.[36] The court rejected this proposition, noting that once the settling parties and the government have agreed, their interests “are essentially aligned and are adverse to those of non-settling PRPs who oppose entry of the decree.”[37] Indeed, the court explained it would be “unrealistic” to believe that the government would “abandon or substantially modify” the proposed consent decree in response to the non-settling PRPs comments “at this late stage of the process.”[38]