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  • Writer's pictureKirk Hartley

Travelers/Manville Asbestos Bankruptcy Opinion – Reaction

I’ve been through the opinion and dissent (here) a couple of times. Travelers won, sort of, and the Second Circuit was reversed, sort of. While reading, I wondered how much the opinion was or was not shaped by the efforts to stay the order on the asset sale in Chrysler, and the now pending efforts to obtain certiorari. We may know that answer some day, but who knows.

Further reading and reflection is in order, but some immediate reactions are as follows, bearing in mind that my reaction is influenced by recency. Specifically, this past Monday, I listened to a talk by Professor Jeffrey Rosen to the Chicago Lawyers Club regarding the Supreme Court. He spent some time focusing on his interview of Chief Justice Roberts and the Chief Justice’s hope to use “business cases” to produce unanimous narrow rulings to enhance the authority of the Court. (BTW, lots of people have lots of things to say about Professor Rosen and shifting views, e.g. here, so I am not holding him out as “the expert.”) Today’s Manville/Travelers ruling is not unanimous due to the two dissents but certainly does fit the “narrow” criteria.

For Chapter 11 cases that involve material amounts of product liability claims, including Chrysler, GM and “asbestos bankruptcies,” the Manville/Travelers decision today is so narrow that all sides likely will claim to take some comfort from the ruling. Realistically, no one can claim to have won a clear victory through today’s opinion, except that Travelers is happier today than it would have been if Justice Steven’s dissent were the Court’s ruling. In fact, today’s ruling is so narrow that the case is sent back to the 2d Circuit for more proceedings as to which entities are or may be bound by the prior rulings. The opinion thus highlights the importance of the 2d Circuit’s conclusions and reasoning in 1) the direct appeal in Chrysler and 2) its opinion on remand in this case.

The opinion can be read to suggest that it is safer to challenge bankruptcy court rulings on direct appeal instead of through rulings in other, later legal proceedings, such as future product liability cases against the debtor or an alleged or actual successor entity, such as New Chrysler. That message will not be lost on 1) debtors that sold mass produced products, 2) product liability claimants, and 3) all other parties to state court product liability cases that involve a product made or sold by a debtor, including component suppliers and other co-defendants in the state court tort suits. Insurers also no doubt will take note too. Certainly today’s ruling puts more focus on the presently pending direct appeal papers now in front of the Supreme Court in the Chrysler case.

No doubt others will have comments over the next few days; I will try to collect comments into one post.

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