Plaintiffs Continue to Probe the Limits of Bankruptcy Court Injunctions in Mass Tort Cases

Plaintiffs continue to probe the limits of bankruptcy court injunctions, an effort that is even more interesting while the Second Circuit’s GM decision makes it way up to SCOTUS. As to the probes, this week brought two new rulings in the WR Grace chapter 11 proceedings. One partially succeeded and one did not succeed at all. Both sets of claims were direct action “failure to warn” claims against insurers that provided workers’ compensation insurance to WR Grace for the Libby Montana manufacturing plant, which included vermiculite processing. The two opinions do not address any due process issues, or whether there was any actual effort to protect the rights of the claimants. Instead, the opinions proceed on the assumption that section 524(g) injunctions are proper. From that perspective, the court barred direct action claims against CNA but allowed direct action claims against Maryland Casualty. The opinions are in many ways identical and the differing outcomes depend on the wording of particular documents from the final chapter 11 plan. The CNA opinion is here and the Maryland Casualty opinion is here.