Dow Corning Corp. v. Claimants' Advisory Committee

Summarized by Paul Hage , Taft, Stettinius & Hollister, LLP
15 years 2 months ago

Citation:

Dow Corning Corporation v. Claimants' Advisory Committee (In re: Settlement Facility Dow Corning Trust), Nos. 09-1827/1830 (6th Cir. Dec. 17, 2010)

Tag(s):

6th Circuit

Ruling:

In reviewing two separate orders by the district court, the Sixth Circuit Court of Appeals held that, because the district court was more familiar with the Amended Joint Plan of Reorganization ("Plan") and the circumstances surrounding it, the Court's role was merely to determine whether the district court's interpretation of the Plan in the respective orders was reasonable. If so, the Court would defer to the district court. Ultimately, the Court concluded that the district court's interpretation of the Plan in one order was reasonable but, for technical grammatical reasons, its interpretation of the Plan in the other order was not.

Procedural context:

In 1995, Dow Corning Corporation ("Debtor") had pending against it thousands of lawsuits relating to breast implants it had manufactured. The Debtor filed a voluntary petition for relief under chapter 11 that year to facilitate settlement of those claims. The Plan established a $1.95 billion fund for claimants who elected to settle rather than litigate their claims. Each of the appeals addressed in this opinion involved a Plan definition that affects payments made under the Plan.

Facts:

At the outset, the Claimants' Advisory Committee ("Committee") and the Debtor disagreed on the standard of review. The Committee advocated for the abuse of discretion standard that typically applies when an appellate court is reviewing the determination of a bankruptcy court. These appeals, however, inolved a decision by a district court. Thus, the Debtor argued that the Court's review should be de novo, citing to Sixth Circuit precedent that "[i]n a bankrupty case on appeal from a district court, [the court] owes no special deference to the district court's decision[.]". In determining which standard to apply, the Court noted that a degree of deference should be given to the district court because, although she did not enter the confirmation order in this case, she had presided over it for fifteen years and, after withdrawing the reference, had acted as the court of first resort for nine years. Thus, when reviewing the district court's interpretation of ambiguous plan language, deference would be given to her determination so long as she assessed extrinsic evidence in choosing among the contrasting reasonable interpretations. Turning to the particular orders in dispute, the first order concerned tissue expanders, which were devices implanted in the body and then gradually filled with saline solution in the weeks that follow. Their purpose was to expand the patient's skin around the device; and upon accomplishing that purpose, they were removed. The question presented was whether the tissue expanders were "Breast Implants" as defined by the Plan. The term "Breast Implant" was defined as: "all silicone gel and saline-filled breast implants with silicone elastomer envelopes manufactured and either sold or otherwise distributed by the Debtor." The district court had held that the tissue expanders at issue did fall within the scope of Breast Implants, thereby opening the door to settlement payments based on a claimant's use of them. In reviewing this determination, the Court noted that the tissue expanders had silicone elastomer envelopes and were saline-filled. The only dispute, then, was whether the subject expanders were "breast implants" as that term is used in the definition. The Court noted that a definition which, amazingly, contains the defined term within it is, by definition, ambiguous. The Court noted that the district court had read the term as meaning any device designed for implantation in the breast. The Debtor, however, had contended that "breast implant" is a term of art in the medical community which includes only those devices designed for long-term implantation in the breast, thereby excluding the tissue expanders. Both parties had submitted significant extrinsic evidence in support of their respective reading of the defined term. Despite the deference due to the district court, the Court declined to affirm the district court's order because, although the Court felt the definition of Breast Implant was unquestionably ambiguous, the district court apparently had thought that it was not. As a result the district court did not consider the parties' extrinsic evidence with respect to the provision. Had the district court been the court that entered the confirmation order, the Court would have affirmed the district court's decision. However, because the district court here did not enter the confirmation order, the Court vacated the its order with respect to tissue expanders and remanded the matter to allow consideratoin of the extrinsic evidence. Once it did that, the Court noted, it would defer to the district court's decision. The second order concerned the Plan's definition of total disabillity, which was defined in the Plan as follows: "An individual will be considered totally disabled if she demonstrates a functional capactiy adequate to consistently perform none or only few of the usual duties or activities of vocation or self-care." The interpretation of this term was important because claimants who meet the Plan's definition of "total disability" receive larger settlement payments than they otherwise would be entitled to. The Debtor took a narrower view of the term advocating that the Plan requires that a claimant be disabled in both categories - vocation and self-care. Conversely, the Committee took a broader view arguing that a claimant's inability to do more than a few activities in only one of the categories - vocation or self-care - is enough to meet the definition of total disability. Ultimately, the district court held that the broader view advocated by the Committee was the correct one because the usage of the word "or" was disjunctive. The Court disagreed, holding that "or" is normally conjunctive when introduced by "none" or "not". For example, the Court noted, "to say that 'none of the teacher or students will be at the school on July 4' ... does not mean that only one of those groups will be absent that day. It means that both groups will be." Thus, the Court concluded, "to say that a claimant can perform none (or only a few) of the activities of vocation or self-care, means that she is disabled from performing both types of activities." Thus, based on this technical grammatical reading, the language was unambiguously conjunctive. As such, the Court rejected the district court's interpretation of the Plan provision, reversed the second order, and remanded the matter back to the district court.

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