Lydon v. T&N Limited

United States Court of Appeals for the First Circuit, No. 14-1281, February 11, 2015
Affirming the ruling of the district court, the First Circuit determined that the plain language of a confirmed chapter 11 Plan, which created a litigation trust to which individual asbestos claims were assigned, compelled the conclusion that all such claims were time-barred unless brought within thirty days of the notice of the Plan's effective date. That deadline was deemed to govern because (i) the automatic stay terminated pursuant to 11 U.S.C. sec. 362(c)(2)(C), (ii) 11 U.S.C. sec. 108(c)(2) extended the time by only thirty days within which an action could be brought when the statute of limitations had not run prior to the filing of the bankruptcy, (iii) the Plan expressly allowed for tort actions to be brought by the Trust immediately, (iv) the Plan could have been drafted to address statute of limitations problems, but wasn't, and the intent of the Plan draftsmen, even if determinable, could not trump the plain meaning of the Plan, which governs the Trust's rights, and could not fairly be imposed on the insurers absent adequate language to that effect, (v) the delayed discharge of such claims is not dispositive, and (vi) the Plan's permission to sue "in the ordinary course" could not operate to "modify" a stay that otherwise had been lifted by the Plan's language and by operation of law.
Procedural context:
Appeal from the United States District Court for the District of Massachusetts of an order allowing the defendant insurer's motion for summary judgment and dismissing a tort action as being time-barred.
In the T&N Limited chapter 11 case, a Plan was confirmed on Dec. 27, 2007 which created the Federal Mogul Asbestos Personal Injury Trust (the "Trust"). For strategic reasons, the Plan provided that (i) the Debtor's asbestos liability would continue post-confirmation, (ii) the Trust would bring asbestos actions on behalf of the actual claimants, which claims were assigned to the Trust, (iii) the actions would be defended by certain insurers, and (iv) a discharge of all liability would be triggered when the insurance funds were exhausted. The Plan stated, more particularly, that the Trust was free to commence tort actions in any appropriate forum, and that the Debtor (its insurers actually) had the right to assert any defenses. There was no explicit language addressing statutes of limitation or, generally, up to what date suits could be brought. The Trust filed the instant claim in Massachusetts on Nov. 22, 2011, nine years after the death of the plaintiff and almost four years after the Plan became effective. But for the chapter 11 stay, the state three year statute of limitations would have run prior to 2007. The question presented by a summary judgment motion filed by the insurers was whether the claim became time-barred under 11 U.S.C. sec. 108(c)(2) thirty days after the Plan's effective date, or, as the Trust contended, whether the Plan extended the stay indefinitely while still allowing suits to be filed. The district court allowed the motion.
Lynch, Stahl and Kayatta

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