Congoleum Corporation V. Bath Works Corporation
- Summarized by Stephen Falanga , Walsh Pizzi O'Reilly Falanga LLP
- 1 year 6 months ago
- Case Type:
- Business
- Case Status:
- Affirmed
- Citation:
- 23-1295 (3rd Circuit, Aug 01,2024) Published
- Tag(s):
-
- Ruling:
- In this non-precedential opinion, the Third Circuit affirmed the decision of the District Court finding that the Bankruptcy Court lacked good cause to reopen the former confirmed chapter 11 case of Congoleum Corporation in order to address a dispute between two non-debtors as the reopening impacted neither the administration of the bankruptcy estate nor the interests of the reorganized debtor,
- Procedural context:
- An insurance company sought to reopen the former bankruptcy case of the debtor, Congoleum Corporation pursuant to 11 U.S.C. § 350(b)in order to request that the Bankruptcy Court rule on the meaning of a provision of the Confirmation Order regarding a settlement and release of remediation claims being asserted by Occidental Chemical Corporation which was cleaning up property formerly owned by Congoleum. The Bankruptcy Court reponed the case and adjudicated the dispute - finding the insurer was not liable for any costs and Occidental appealed to the District Court, which reversed. On appeal to the Third Circuit, the Third Circuit affirmed the decision of the District Court reversing the Bankruptcy Court's decision to reopen the case.
- Facts:
- In 2003, Congoleum Corporation—a flooring manufacturer—filed for Chapter 11 bankruptcy protection in the District of New Jersey to resolve a series of asbestos-related lawsuits. Congoleum then negotiated a settlement with several insurers, including Century Indemnity. The agreement—what the parties call the “Century Settlement”— provided for a sale of excess insurance policies back to Century, free and clear of all claims under the policies. Appellant Bath Iron Works Corporation (“BIW”) seems to hold some of those released claims. In 2006, the bankruptcy court conditionally approved the Settlement with the finding that BIW had “no responsibility for any of the liabilities of the Congoleum Flooring Business.”
In 2010, the District Court ratified Congoleum’s Settlement with Century as part of its approval of the final Confirmation Order (the “2010 Confirmation Order”). Paragraph 104 of the 2010 Confirmation Order stated that “[i]n support of the Century Settlement and the Century Approval Order, the Court finds that the following Century Additional Named Insureds have no responsibility for any of the liabilities of the Congoleum Flooring Business: . . . Bath Iron Works Corp.”
In 2018, Occidental Chemical Corporation sued BIW in the District of New Jersey for remediation costs on properties
previously owned by Congoleum.1 BIW responded that Occidental’s claims were barred by Paragraph 104 of the 2010 Confirmation Order. In 2020, while Occidental’s suit against BIW was still pending, Congoleum again filed for bankruptcy. BIW filed an adversary complaint in the new Congoleum bankruptcy seeking a declaratory judgment on the meaning of Paragraph 104 of the 2010 Confirmation Order. BIW asked the bankruptcy court “to clarify that . . . Paragraph 104—which states that BIW has ‘no responsibility for any of the liabilities of the Congoleum Flooring Business’—means that BIW is not a successor to the Congoleum Flooring Business and is not responsible for any liabilities of the Congoleum Flooring Business, including any environmental liabilities.” The Bankruptcy Court
granted summary judgment for BIW, holding that Paragraph 104 of the 2010 Confirmation Order “memorializes that BIW has no liability for any claims—asbestos and non-asbestos—stemming from the Congoleum Flooring Business.”
In the meantime, Occidental’s suit against BIW progressed, and Occidental moved for summary judgment. In response to Occidental’s motion, BIW returned to the Bankruptcy Court, asking to reopen Congoleum’s first bankruptcy proceeding and declare that the 2010 Confirmation Order barred Occidental’s claims against BIW pending in the District Court. The Bankruptcy Court granted BIW’s motion, finding the Bankruptcy Court was in a better position than the District Court already handling Occidental’s suit to interpret and apply the 2010 Confirmation Order. The Bankruptcy Court then concluded that, under the 2010 Confirmation Order, BIW had no liability for any of the claims surrounding Congoleum’s facilities, a conclusion barring Occidental’s claims in its separate suit.
On appeal, the District Court reversed that decision, reasoning the Bankruptcy Court lacked good cause to reopen and the Third Circuit affirmed concluding that BIW has not met its burden to establish § 350(b)’s “for other cause” provision extends to this attempt to reopen a decade-old bankruptcy proceeding to resolve a dispute between non-debtors already pending before a federal district court, where the dispute does not impact the administration of the estate, the interests of the debtor, or even involve an order issued by the bankruptcy judge to whom the motion is directed.
The Third Circuit noted that the parties remain free to litigate the force and effect of Paragraph 104 of the 2010 Confirmation Order in Occidental’s suit before the District Court.
- Judge(s):
- CHAGARES, Chief Judge, MATEY and FUENTES, Circuit Judges
ABI Membership is required to access the full summary. Please Sign In using your ABI Member credentials. Not a Member yet? Join ABI now - it is absolutely worth it!
