In Re: Johns-Manville Corporation

Background

Johns-Manville and J.T. Thorpe faced asbestos-related litigation and each later entered bankruptcy. The Manville Personal Injury Settlement Trust and the Thorpe Insulation Company Asbestos Settlement Trust were created during those bankruptcy proceedings to maximize assets and pay claimants injured by Johns-Manville asbestos products.

Manville brought an adversary proceeding seeking a declaration that the court-approved Trust Distribution Process barred Manville from indemnifying Thorpe for payments to California-based claimants who had separately entered into good-faith settlements with Manville. The Trust Distribution Process governs indemnity claims between the trusts. It defines a “Distributor Indemnity Claim” as an indemnity claim by a distributor that is valid under applicable law. Thorpe is treated as a distributor under the process.

The bankruptcy court ruled partly for Manville. As described in this opinion, the bankruptcy court held that the Trust Distribution Process required an indemnity claim to be allowed under applicable state law; that no express indemnification agreement existed between Thorpe and Manville; that California Code of Civil Procedure section 877.6 applied to indemnity claims arising from conduct in California; and that settlements made under the Trust Distribution Process were necessarily made in good faith for purposes of that statute. The bankruptcy court also found that factual disputes remained about whether Manville's California settlements complied with the Trust Distribution Process.

Thorpe's motion

Thorpe asked for permission to file an interlocutory appeal, meaning an appeal before the bankruptcy court entered a final judgment. Thorpe challenged the bankruptcy court's conclusions that the Trust Distribution Process did not provide an express indemnification right and that section 877.6 barred Thorpe's indemnity claims.

Under the standards the district court applied, permission for an interlocutory appeal required Thorpe to show a controlling legal question, substantial grounds for disagreement about that question, and that an immediate appeal would materially advance the end of the litigation. Thorpe also had to show exceptional circumstances justifying an early, piecemeal appeal.

Court's analysis

The court held that Thorpe had not shown a controlling question of law. The issues involved interpreting the Trust Distribution Process. If Thorpe relied on extrinsic evidence, such as an alleged 1989 letter agreement or Manville's past payment practices, the interpretation could become a factual question unsuitable for an interlocutory appeal. The court also stated that even if the bankruptcy ruling were reversed, the bankruptcy court would still have to determine whether Thorpe suffered losses from payments to California-based claimants and, if so, the extent of those losses.

The court further held that Thorpe had not shown substantial grounds for disagreement. Thorpe cited no authority contradicting the bankruptcy court's interpretation that the Trust Distribution Process did not create an express indemnification right. Thorpe also cited no authority contradicting the conclusion that section 877.6 applied to Manville's settlements with California-based claimants. The court explained that the absence of relevant precedent, or the fact that an issue might be one of first impression, was not enough by itself.

Finally, the court found that Thorpe had not identified exceptional circumstances warranting early appellate review. Because factual issues would remain even if the bankruptcy decision were reversed, an immediate appeal would not terminate the litigation or materially affect its outcome.

Disposition

Judge Laura Taylor Swain denied Defendant's motion for leave to file an interlocutory appeal. The order states that it resolves Docket Entry No. 3 and directs the Clerk of Court to close the district-court case. The opinion does not state that the underlying indemnity dispute was finally resolved by this order.