Arnold v. Garlock, Inc.

UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 01-41327 through 01-41335
No. 01-41366 (Consolidated)
No. 01-11481 (Consolidated)
No. 01-51209 (Consolidated)
No. 01-51241 (Consolidated)
BILLY ARNOLD, JR., ET AL.,
Plaintiffs - Appellees,
VERSUS
GARLOCK, INC.,
Defendant - Appellant.
Appeals from the United States District Court
for the Southern District of Texas, Corpus Christi
December 28, 2001
Before DeMOSS, PARKER and DENNIS, Circuit Judges
ROBERT M. PARKER, Circuit Judge:
Before us are 37 nearly identical motions by the Appellant,
Garlock, Inc. (“Garlock”), to stay the proceedings of various
district courts throughout the four federal districts in Texas
pending Garlock’s intended appeal. Having reviewed the various
motions, which we treat as a single motion, the appellees’
1
responses and the amici1 briefs filed in the case, we deny
Garlock’s motion.
I. Background.
The cases before us were all originally brought as personal
injury tort or wrongful death (“PITWD”) claims by various
plaintiffs against a group of co-defendants which is, by and large,
similar in each case. The plaintiffs’ claims arise from exposure
to asbestos in one manner or another. The result of this exposure
has allegedly led to a plaintiffs’, or a plaintiffs decedents’,
developing one or more forms of respiratory disease leading to
severe health problems or death.2 The defendants, including
1
Two amici briefs have been filed. The first was “Brief Amici
Curiae of Baron & Budd, P.C. and Provost Umphrey in Opposition to
Garlock’s Motion to Stay” purporting to represent the interests of
“thousands of victims of asbestos-related disease with cases
pending in the state courts of Texas and elsewhere” who could be
adversely affected by a stay in Garlock’s case. The second was
“Memorandum of Amicus Curiae the Official Committee of Asbestos
Claimants of Federal-Mogul Global, Inc., in Response to Garlock
Inc.’s Motions for a Stay Pending Appeal,” also arguing that a stay
in asbestos litigation would adversely affect plaintiffs in other
cases and is not warranted here as a matter of law.
2
As of December 13, 2001, appellees asserted that they
collectively numbered 82 individual plaintiffs and that the
diseases involved in their various lawsuits included:
7 Living plaintiffs with asbestos-related mesothelioma;
18 Plaintiffs’ decedents with asbestos-related mesothelioma;
17 Living plaintiffs with asbestos-related lung cancer;
26 Plaintiffs’ decedents with asbestos-related lung cancer;
4 Living plaintiffs with asbestos-related laryngeal or
esophageal cancer;
3 Plaintiffs’ decedents with asbestos-related laryngeal or
esophageal cancer;
6 Living plaintiffs with asbestosis;
1 Living plaintiff with asbestos-related pleural disease.
See Appellees’ Additional Response to Appellant’s Motion for Stay
2
Garlock, number from about 40 to over 60 in the various individual
cases. Their commonality is to be, or to have been, in a business
either producing or making use of asbestos.3 In each of the
instant cases, both Garlock and Gasket Holdings, Inc. (“Gasket
Holdings”), a subsidiary of Federal-Mogul, Inc. (“Federal-Mogul”),
were named as co-defendants, among the many others. All of the
cases were originally filed under Texas state law in Texas state
court without implicating federal jurisdiction.
In October 2001, Federal-Mogul filed for protection pursuant
to reorganization under Chapter 11 of Title 11 of the United States
Code, in bankruptcy. Federal-Mogul included each of its 156
affiliates and subsidiaries, including Gasket Holdings, in the
Chapter 11 filing. All of the bankruptcy cases were filed in the
United States Bankruptcy Court for the District of Delaware.
Pending Appeal (hereinafter, “Appellees’ Additional Response”) at
2. Motions in additional cases have been filed since these figures
were compiled.
3
The specifics of the claims in these cases are not in the record
before us because we are considering only whether to place a stay
on the various proceedings to permit a formal appeal and review of
the individual records on appeal. There have been hundreds of
thousands of asbestos-related lawsuits brought in Texas and
throughout the country in the last three decades, however. A
typical claim asserts that the numerous “named defendants either
made, sold, marketed, brokered, imported, specified or used
asbestos-containing products in Texas which were defective and
unreasonably dangerous as designed, manufactured and marketed.”
See, e.g., Broyles v. U.S. Gypsum Co., 266 B.R. 778, 780 (E.D. Tex.
2001). The claims then generally assert causes of action for
“negligence, gross negligence, fraud, deceit, misrepresentation,
battery and defective products theories under Texas state law.”
Id. at 780-81.
3
In mid October, Garlock began systematically removing asbestos
cases in which Garlock and Gasket Holdings appeared as co-
defendants. Garlock asserted that because the Federal-Mogul group,
including Gasket Holdings, was in bankruptcy and because Garlock
had made a claim for contribution under Texas state law4 against
Gasket Holdings, invoking federal jurisdiction was appropriate
because the contribution claim was “related to” a claim under Title
11 in accordance with 28 U.S.C. § 1334(b). Garlock therefore
proceeded with removal actions in several federal district courts
throughout Texas. Besides the 37 cases now before us, Garlock
removed about 40 similar cases in the federal districts of Texas.
In each of the 37 instant cases,5 Garlock moved in the
respective district court for the entire case to be transferred to
the United States District Court for the District of Delaware under
28 U.S.C. § 157(b)(5). Such a transfer would permit that district
court to determine the appropriate venue, either itself or the
federal district court in which the respective action arose
originally, in which to adjudicate the PITWD claims against the
debtor and against Garlock as a non-debtor co-defendant who asserts
4
See TEX. CIV. PRAC. & REM. CODE §§ 32.001-003, 33.001-004, 011-017.
5
In Garlock’s haste to remove cases to federal district court,
it removed a case in which Garlock and the plaintiffs had already
reached a settlement. That erroneously removed case, filed as
Smith v. Able Supply Co., Civil Action number G-01-673 in the
United States District Court for the Southern District of Texas,
Galveston Division, was included in Garlock’s flurry of motions to
stay under Fifth Circuit Case No. 01-41370. Garlock has since
filed a notice of withdrawal of appeal in this one case.
4
a claim for contribution against the debtor.
The plaintiffs in every such removed case uniformly responded
with a motion to dismiss debtor Federal-Mogul/Gasket Holdings
(hereinafter, “debtor”) as a defendant, a motion to sever any
remaining claims against the debtor and a motion for the district
court to exercise mandatory or discretionary abstention or to
remand for lack of subject matter jurisdiction or for equitable
reasons. The district judge in each case ruled for the plaintiffs
and either dismissed the debtor as a defendant or remanded the
remainder of the case to Texas state court or both. The 37 cases
now under emergency motion for stay to this court originated in the
Corpus Christi Division and Galveston Divisions of the Southern
District, the Beaumont and Paris Divisions of the Eastern District,
the Dallas Division of the Northern District, and the San Antonio
and Austin Divisions of the Western District.
The district court in Corpus Christi dismissed the debtor with
prejudice, severed all remaining claims against the debtor and
transferred them under 28 U.S.C. § 157(b)(5) to the United States
District Court for the District of Delaware, and remanded all
remaining claims to Texas state court for lack of subject matter
jurisdiction under 28 U.S.C. § 1447(c) and/or for equitable reasons
under 28 U.S.C. § 1452(b). The district court made no ruling
regarding either mandatory or discretionary abstention.
The district court in Dallas referred to the Corpus Christi
5
court’s reasoning as “unassailable” and entered an order with
identical results.
The district court in Galveston determined that bankruptcy
subject matter jurisdiction under 28 U.S.C. § 1334(a) and (b) did
not exist and that the case had been improperly removed under 28
U.S.C. § 1452(a). The court therefore remanded the entire case and
all parties to Texas state court for lack of subject matter
jurisdiction.
The district court which ruled in the Beaumont and Paris
Division cases held that Garlock’s claim for contribution was
“scantily asserted” and unsupported, and even if real, was so
tenuously related to the debtor’s bankruptcy case as to be
virtually immaterial. The court remanded for lack of subject
matter jurisdiction under § 1447(c) and alternatively for equitable
reasons under § 1452(b).
The district court in San Antonio cited the decisions of
several other federal district courts, including the Corpus Christi
district court, and determined that subject matter jurisdiction did
not exist, remanded its cases on that basis alone and dismissed the
plaintiffs’ motions to sever as moot.
The district court in Austin severed all claims against the
debtor and transferred them to the District of Delaware under §
157(b)(5) and remanded all other claims to the Texas state court.
Following each of the district courts’ rulings, which occurred
between November 9 and December 5, Garlock filed a notice of appeal
6
and moved in the respective district court for a stay of the
court’s order pending appeal. Some of the district courts issued
a denial and some had not yet ruled on Garlock’s stay motion;
regardless, Garlock filed emergency motions to stay the respective
district courts’ orders under FED. R. APP. P. 8 before this court.6
Garlock asserts that it is not attempting to appeal an
unappealable order of remand. Instead, Garlock states that it is
appealing the “appealable” orders of the various district courts,
including the inherent denials of Garlock’s transfer motion under
§ 157(b)(5), any decision to abstain and any dismissal of the
debtor. In so doing, Garlock claims that the “automatic stay”
feature of 11 U.S.C. § 362, relating to cases in bankruptcy, not
only stayed all actions against the debtor when it filed for
bankruptcy, but that it stayed all related actions before the
various district courts as well. Garlock further contends that the
10-day automatic stay of judgment under FED. R. CIV. P. 62 should
have prevented the clerks of the district courts from certifying
the remands back to state courts before Garlock could perfect its
appeal. Some of the district clerks’ offices mailed certified
copies of the remand orders either before or after Garlock’s notice
6
Initially, Garlock filed documents titled “Petition for Writ of
Mandamus to the United States District Court for the Southern
District of Texas [Corpus Christi Division] and Petitioner’s
Emergency Motion for Stay Pursuant to Federal Rule of Appellate
procedure 8(a)(1) Pending Appeal.” In later actions, Garlock has
simply filed an “Emergency Motion for Stay Pending Appeal” from one
or another federal district court. We treat all of Garlock’s
motions as motions for stay.
7
of appeal; some have not yet certified the remand.
What Garlock seeks, essentially, is a procedural path that
would invalidate the clerks’ certification of remand and freeze
further action in the district courts while permitting Garlock to
perfect its appeal on the § 157(b)(5) transfer issue, without
frontally challenging an unappealable remand order. On the basis
of such a transfer, Garlock contends, it seeks a fair and
consolidated proceeding for all parties.
The appellees bring a different view to this court. They
contend that Garlock’s true intent is simply to delay any
proceeding against it for as long as possible. Such a dilatory
intent, appellees contend, will have a devastating effect on them,
some of whom are dying.
Appellees further contend that Garlock’s dilatory intent is
focused solely against these appellees because they have refused to
enter into any standardized settlement plan or agreement such as
those allegedly arranged between Garlock and other law firms
engaged in asbestos litigation. It is true that Garlock has
brought no other, similar case to this court on motions to stay or
transfer except those in which the appellees’ counsel appears for
the plaintiffs. On that basis, counsel characterizes Garlock’s
interest not as an attempt to legitimately pursue a coordinated
remedy under the bankruptcy law but as a cynical attempt to
minimize its exposure with a law firm which “treats each case
individually and attempts to achieve maximum value for its
8
clients.” See Appellees’ Additional Response at 3.
Because of the “emergency” nature of Garlock’s motions, we
implemented a temporary stay in each case to provide sufficient
time to fairly consider whether a formal stay pending appeal should
issue. We have determined that no such stay should issue and, by
this order, dissolve the temporary stays.
Our decision in this case is predicated on two primary bases.
First, that Garlock does not have a valid claim for contribution
against Federal-Mogul or its associated business, Gasket Holdings,
upon which to assert “related to” jurisdiction under the bankruptcy
laws. Second, we find that Garlock has not otherwise met the
elements necessary to obtain a discretionary stay pending appeal by
this court. We will address each point raised in this complex
matter.
II. Jurisdiction, Stays, Transfer of Claims, and Effect of Remand.
We will examine the basis for federal bankruptcy jurisdiction
and the framework of Garlock’s contentions therein.
A. Removal Authority and “Related To” Jurisdiction.
Authority to remove a case relating to a case under title 11
resides in 28 U.S.C. § 1452(a):
A party may remove any claim or cause of action in a
civil action other than a proceeding before the United
States Tax Court or a civil action by a governmental unit
to enforce such governmental unit’s police or regulatory
power, to the district court for the district where such
civil action is pending, if such district court has
jurisdiction of such claim under section 1334 of this
title.
9
Title 28 U.S.C. § 1334(a) provides that “the district courts
shall have original and exclusive jurisdiction of all cases under
title 11.”
Certain matters related to the debtor’s bankruptcy may be
included within the ambit of federal bankruptcy jurisdiction under
28 U.S.C. § 1334, et seq. Specifically, “[n]otwithstanding any Act
of Congress that confers exclusive jurisdiction on a court or
courts other than the district courts, the district courts shall
have original but not exclusive jurisdiction of all civil
proceedings arising under title 11, or arising in or related to
cases under title 11.” See id. § 1334(b).
As the United States Supreme Court has noted, “related to”
bankruptcy proceedings include (1) causes of action owned by the
debtor which become property of the estate pursuant to 11 U.S.C. §
541, and (2) suits between third parties which have an effect on
the bankruptcy estate. Celotex Corp. v. Edwards, 514 U.S. 300, 308
n.5 (1995). Garlock’s asserted claim for contribution against the
debtor falls into the second category.
Most of the federal circuits, including the Fifth Circuit,
derive their “related to” jurisprudence from Pacor, Inc. v.
Higgins, 743 F.2d 984 (3rd Cir. 1984). See Celotex, 514 U.S. at
308 n.6. In Pacor, the Third Circuit determined that a third-party
controversy not directly involving a debtor in bankruptcy was not
related to the bankruptcy, but was, at best, a precursor to a claim
10
against the debtor. See Pacor, 743 F.2d at 995. The Third Circuit
so ruled on the basis that any judgment between the two third
parties could not have any preclusive effect by either res judicata
or collateral estoppel against the debtor, who would be free to
relitigate any claim brought against it. Id. Thus, “related to”
jurisdiction would not come into play until a litigant brought a
direct claim under bankruptcy jurisdiction based on the result of
the prior judgment.
Within the Fifth Circuit, the test for whether a proceeding
properly invokes federal bankruptcy jurisdiction is the same as the
Third Circuit’s Pacor test, namely, whether “the outcome of that
proceeding could conceivably have any effect on the estate being
administered in bankruptcy.” In re Canion, 196 F.3d 579, 585 (5th
Cir. 1999). Certainty, or even likelihood of such an effect is not
a requirement. Id. at 587 n.30 (citing Copelin v. Sprico, Inc.,
182 F.3d 174 (3rd Cir. 1999)).
In In re Canion, a judgment creditor of the debtor, Canion,
brought a direct action against several family members, employees,
friends and associates of the debtor, asserting claims of fraud and
tortious interference with the judgment creditor’s recovery of the
judgment. In re Canion, 196 F.3d at 582. Our determination was
that this circumstance fell within the “related to” bankruptcy
jurisdiction at the time the case was referred to the bankruptcy
court (which is the time at which jurisdiction is tested) because
11
the outcome of the proceedings against the defendants conceivably
could have increased the debtor’s estate. Id. at 587. Appellees
argue that Garlock presents no such direct claim and that its claim
for contribution, not based on a contractual relationship, is too
tenuous to connect the underlying asbestos PITWD claims to the
debtor.
1. “Contribution” as a basis for “related to” jurisdiction
and the automatic stay provision in bankruptcy.
The Sixth Circuit has held that a claim for contribution is a
sufficient basis for finding “related to” jurisdiction in
bankruptcy and, in fact, is a sufficient ground upon which to
direct a transfer of venue for related tort claims under 28 U.S.C.
§ 157(b)(5), the same relief sought by Garlock here. In In re Dow
Corning, 86 F.3d 482 (6th Cir. 1996), where a relatively small
number of non-debtor co-defendants were closely related to the
pending breast implant litigation against debtor Dow Corning, a
claim of contribution by the co-defendants against Dow Corning,
even if only intended and not yet asserted, was sufficient to
invoke “related to” bankruptcy jurisdiction.
In In re Walker, 51 F.3d 562 (5th Cir. 1995), a party held
liable to a debtor for a violation of the automatic stay provided
in 11 U.S.C. § 362 sought to invoke “related to” jurisdiction
against a third party by asserting a claim of contribution under §
362. Id. at 565-66. We found no federal contribution right to be
12
invoked in § 362 and denied the appellant’s claim. Id. at 567-68.
Here, Garlock has asserted its contribution rights entirely under
Texas state law. As we discuss in Part III, Garlock’s contribution
claim is invalid and therefore no “related to” jurisdiction could
exist in this case.
B. Transfer of Personal Injury Tort and Wrongful Death Claims
under 28 U.S.C. § 157(B)(5).
Garlock seeks to transfer all of the PITWD claims in each of
the lawsuits against it in accordance with 28 U.S.C. § 157, which
empowers the district court where a bankruptcy is proceeding to
determine the venue for certain PITWD claims related to the
bankruptcy. Specifically,
The district court shall order that personal injury tort and
wrongful death claims shall be tried in the district court in
which the bankruptcy case is pending, or in the district court
in the district in which the claims arose, as determined by
the district court in which the bankruptcy case is pending.
See 28 U.S.C. § 157(b)(5). Use of this transfer provision in the
mass tort context is not strictly novel, but is to date uncommon.7
In the cases before us, the various district courts either
explicitly or implicitly denied Garlock’s motions to transfer all
underlying PITWD claims from the districts in Texas to the District
of Delaware.
The Sixth Circuit has held that the denial of a motion to
7
Section 157(b)(5) was the basis for transferring the PITWD
claims in A.H. Robins v. Piccinin, 788 F.2d 994 (4th Cir. 1986) and
In re Dow Corning, 86 F.3d 482 (6th Cir. 1996).
13
transfer under § 157(b)(5) is immediately appealable on different
grounds including a less rigid view of the “finality” requirement
for bankruptcy judgments and under the collateral order doctrine of
Cohen v. Beneficial Indus. Loan Corp., 337 U.S. 541 (1949). See In
re Dow Corning, 86 F.3d 482, 488 (6th Cir. 1996). Because of our
ultimate holding herein, we need not determine the same issue for
this circuit. Regardless, Garlock claims it should benefit from a
stay of the district courts’ orders to present an appeal.
C. Stays Applicable to Bankruptcy Proceedings.
1. Title 11 U.S.C. § 362.
Once a party files in bankruptcy, under Chapter 11, for
example, 11 U.S.C. § 362, et seq., stays further actions against
the debtor. Virtually any act attempting to enforce a judgment
against or obtain property from the estate of the debtor is stayed
once the title 11 proceedings are commenced. See id. § 362(a)(1)-
(8). In the instant cases, Garlock contends that § 362 should stay
any further actions against the non-debtor co-defendants and should
stay the various district courts from dismissing debtor Federal-
Mogul companies or remanding the related cases to state court.8
Section 362 is rarely, however, a valid basis on which to stay
actions against non-debtors. See Wedgeworth v. Fibreboard Corp.,
8
Such a stay would enable Garlock to perfect an appeal of the
district courts’ explicit or inherent denials of Garlock’s §
157(b)(5) transfer motion without having to contend with an order
of remand.
14
706 F.3d 541, 544 (5th Cir. 1983)(“[w]e join [the cited courts] in
concluding that the protections of § 362 neither apply to co-
defendants nor preclude severance”).
By exception, a bankruptcy court may invoke § 362 to stay
proceedings against nonbankrupt co-defendants where such identity
between the debtor and the third-party defendant exists that the
debtor may be said to be the real party defendant and that a
judgment against the third-party defendant will in effect be a
judgment or finding against the debtor. A.H. Robins Co., 788 F.2d
994, 999 (4th Cir. 1986). In that case, however, the non-debtor
co-defendants were indemnified associates, employees or insureds of
the debtor sole manufacturer of the Dalkon Shield intrauterine
device. Here, Garlock is one of scores of different asbestos
makers, users, importers, etc., with no interest to establish such
an identity with debtor Federal-Mogul/Gasket Holdings. There is no
claim of a formal tie or contractual indemnification to create such
an identity of interests.
2. Federal Rule of Civil Procedure 62.
Garlock has also asserted that FED. R. CIV. P. 62(a) should have
operated to effect a ten-day stay of the various district courts’
orders before they were executed. In pertinent part, Rule 62(a)
establishes that “no execution shall issue upon a judgment nor
shall proceedings be taken for its enforcement until the expiration
of 10 days after its entry.” Garlock’s concern is that, lacking
15
the protection of the ten-day stay, the district clerks’ offices
were free to certify the various remand orders at any time and by
doing so, potentially destroy federal jurisdiction without
possibility of appellate review.9 Garlock contends that it is not
seeking appellate review of an order to remand, but seeks a stay of
the remand order in the district court under FED. R. CIV. P. 62(d)
upon appeal of the § 157(b)(5) issue.
Rule 62(d) relates to Rule 62(a) in that Rule 62(a) provides
a respite from the immediate execution of a judgment, except for an
interlocutory or final judgment in an action for an injunction or
in a receivership action, or for an accounting in an action for
infringement of letters patent. Rule 62(d) then provides for a
stay pending appeal, subject to the exceptions in Rule 62(a).
The stay provisions of Rule 62 pertain to judgments for money.
Hebert v. Exxon Corp, 953 F.2d 936, 938 (5th Cir. 1992). That does
not preclude diverse forms of judgment pertaining to monetary
responsibility from a stay under Rule 62(d) pending appeal nor Rule
62(a) for ten-day automatic stay of judgment. See id. at 938-39
(overturning a district court’s denial of a stay of declaratory
9
Garlock’s references to FED. R. CIV. P. 62, et seq., in the
Petitioner’s Motions for Stay are primarily aimed at an argument to
establish an appeal as a matter of right. Once Garlock discovered,
however, that the federal district court in Corpus Christi had
already mailed certified copies of the court’s remand orders
without waiting the ten-day period specified in Rule 62(a), it
filed a series of “Emergency Motion[s] for Supplemental Relief”
asking this court to direct the district clerk’s office to, in
effect, “de-certify” its certification.
16
judgment where the declaratory judgment was, in effect, a money
judgment suitable for a Rule 62(d) stay subject to the requirements
of Rule 62(a)).
In the instant cases, however, the subject matter of Garlock’s
motion is not for a stay of judgment, declaratory or otherwise. It
is for a stay of remand under Rule 62. A remand of an ongoing case
is not a final judgment following a full adjudication of a claim,
the result of which may be appealed. Even if the subject matter of
the underlying litigation is solely money damages, there is no
“money judgment” inherent in its remand. Accordingly, there is no
basis in Rule 62 for such a stay. See City of New Orleans v. Nat’l
Serv. Cleaning Corp., No. 96-1601, 1997 WL 5915, at *1 (E.D. La.
Jan. 6, 1997).
Further, Rule 62 itself provides no authority to revoke a
remand once it has become effective. See, e.g., Rivera-Perez v.
Mass. Gen. Hosp., 193 F.R.D. 43, 45 (D.P.R. 2000).
On that basis, Garlock is not entitled to the Rule 62
automatic stay.
D. Effect of Remand.
We have consolidated many of these cases according to date or
by court, but as indicated in Part I, the orders are not entirely
uniform. All of them include a remand for lack of subject matter
jurisdiction, citing 28 U.S.C. § 1447(c). However, two of the
courts did not make such a finding until after the debtor had been
17
dismissed with prejudice from the plaintiffs’ cases and the
remaining cross-claims for contribution severed and transferred to
the District of Delaware. Two others remanded for lack of subject
matter jurisdiction without dismissing the debtor, without detailed
explanation. One court did not dismiss the debtor but found
Garlock’s claims for contribution to be scanty and, if real, too
tenuous and remanded. Some courts remanded on equitable grounds.
1. Remand for lack of subject matter jurisdiction.
A remand for lack of subject matter jurisdiction under 28
U.S.C. § 1447(c) is ordinarily barred from appellate review by 28
U.S.C. § 1447(d). See State of Rio de Janeiro v. Philip Morris,
Inc., 239 F.3d 714, 716 (5th Cir. 2001)(noting that as long as a
district court’s remand order is based on lack of subject matter
jurisdiction, a court of appeals lacks authority to review a remand
under § 1447(d); also referring to “the black hole force of a
remand for want of jurisdiction”). There are few exceptions.
Notably, remand under a district court’s citation of § 1447(c) for
a reason not embraced within that statute is subject to appellate
review. Id. at 715 (citing Thermtron Products, Inc. v.
Hermansdorfer, 423 U.S. 336, 343 (1976)). That exception is
inapplicable here.
Rather than fruitlessly attempting an appellate review of a
district court’s remand order, we instead examine the steps leading
from a district judge’s decision to remand to execution of the
18
remand order.
A § 1447(c) order of remand is not self-executing. Section
1447(c) provides, in pertinent part, that upon determination that
a case should be remanded, “[a] certified copy of the order of
remand shall be mailed by the clerk to the clerk of the State
court. The State court may thereupon proceed with such case.” See
McClelland v. Gronwaldt, 155 F.3d 507, 514 n.5 (5th Cir. 1998).
This provision creates legal significance in the mailing of a
certified copy of the remand order in terms of determining the time
at which the district court is divested of jurisdiction. Id.
(citing the discussion and references in Browning v. Navarro, 743
F.2d 1069, 1078-79 (5th Cir. 1984)). On that basis, the federal
court is not divested of jurisdiction until the remand order,
citing the proper basis under § 1443(c), is certified and mailed by
the clerk of the district court.
Once the remand order is certified and mailed, however, the
matter remanded is removed from federal jurisdiction. Of all the
cases brought before us under Garlock’s motions, most have already
been certified and mailed by the respective district clerks.
2. Equitable remand.
Of greater import in this particular case is the effect of an
equitable remand.
The court to which [claim or cause of action related to
bankruptcy cases] is removed may remand such claim or
cause of action on any equitable ground. An order
entered under this subsection remanding a claim or cause
19
of action, or a decision to not remand, is not reviewable
by appeal or otherwise by the court of appeals under
section 158(d), 1291, or 1292 of this title or by the
Supreme Court of the United States under section 1254 of
this title.
See 28 U.S.C. § 1452(b). This remand statute, unlike § 1447(c),
carries no certification and mailing requirement, nor have we found
authority to require such, as much as that would promote procedural
consistency with § 1447(c). Whether such an equitable remand is
self-executing is less important than the stricture that, once a
matter related to a bankruptcy case is equitably remanded, it is
not subject to federal appellate review on any basis. See Hawking
v. Ford Motor Credit Co., 213 F.3d 540, 550 (5th Cir. 2000); Sykes
v. Texas Air Corp., 834 F.2d 488, 490 (5th Cir. 1987)(even an
equitable remand based on a substantive law issue such as lack of
subject matter jurisdiction is unreviewable, in part because of the
likelihood of throwing matters into confusion months or years later
after other proceedings, e.g., in state courts).
Garlock’s emergency petition seeks to halt the progress of a
remand before it leaves the district court for an immediate appeal
of a collateral order. The determination of venue for PITWD cases
such as these under 28 U.S.C. § 157(b)(5) would seem to be the type
of matter which could be readily decided without creating the type
of confusion following an order of remand with which we were
concerned in Sykes. The equitable remand of bankruptcy-related
matters harbors no such opportunity.
20
Because some of the various subject-matter jurisdiction
remands have not yet been certified and mailed, and because some
have not been remanded equitably, we will proceed with an analysis
of whether Garlock should otherwise be granted a stay pending
appeal under our authority in FED. R. APP. P. 8 in those matters not
barred from further review.
III. Merits of the Motion for Stay.
When presented with a motion for a discretionary stay pending
appeal, we employ a four-part test. See In re First S. Sav.
Assoc., 820 F.2d 700, 704 (5th Cir. 1987)(citing Ruiz v. Estelle,
666 F.2d 854, 856 (5th Cir. 1982)(“Ruiz II”)). While each part
must be met, the appellant “need not always show a ‘probability’ of
success on the merits; instead, the movant need only present a
substantial case on the merits when a serious legal question is
involved and show that the balance of the equities weighs heavily
in favor of granting the stay.” Id. (quoting Ruiz v. Estelle, 650
F.2d 555, 565 (5th Cir. Unit A June 1981)(“Ruiz I”)).
A. Whether the movant has made a showing of likelihood of success
on the merits.
Despite the possible availability of a discretionary stay
pending appeal, even if Garlock had avoided remand, it could not
show a probability of success on appeal.
First, there was no 11 U.S.C. § 362 automatic stay of actions
available to the non-debtor co-defendants of the debtor, Federal-
21
Mogul/Gasket Holdings. Therefore, while § 362 acted to stay any
claims against the Federal-Mogul entities, including Garlock’s
putative claim of contribution, it carried no force to stay actions
as between the remaining co-defendants, the debtor and the various
plaintiffs. On that basis, the plaintiffs were free to dismiss
Federal-Mogul and its associated entities under FED. R. CIV. P.
41(a)(1). Even if Garlock had filed a counterclaim against the
plaintiffs in each such case, which Garlock does not assert, the
district court would have been within its discretion to dismiss by
order of the court under Rule 41(a)(2).
For those cases in which the debtor was formally dismissed,10
such dismissal was with prejudice and, under Texas law, eliminated
Garlock’s contribution claim against the debtor. It is well
established under Texas case law that neither contribution nor
indemnification can be recovered from a party against whom the
injured party has no cause of action. See Safway Scaffold Co. of
Houston, Inc. v. Safway Steel Products, Inc., 570 S.W.2d 225, 228-
29 (Tex. App.--Houston [1st Dist.] 1978, writ ref’d n.r.e.). In
modern Texas code, a “responsible third party” from whom
contribution is sought must “be liable to the plaintiff for all or
a part of the damages claimed against the named defendant or
defendants.” See TEX. CIV. PRAC. & REM. CODE ANN. §
10
By our reckoning, this includes all of the cases ruled on by
the district courts in Corpus Christi and Dallas.
22
33.011(6)(A)(iii)(Vernon 2001). Thus, no claim for contribution
may lie in those cases wherein the district court dismissed the
debtor with prejudice.
Second, the Texas code eliminates a debtor in bankruptcy as a
“responsible third party” from whom contribution may be sought,
except to the extent that liability insurance or other source of
third party funding may be available to pay the claims asserted
against that debtor. Id. § 33.011(6)(B)(ii). Garlock has
addressed the issue of the debtor’s insurance peripherally, but has
not clearly represented whether the insured debtor is Federal-Mogul
itself, Federal-Mogul’s subsidiary Gasket Holdings (successor to
Flexitallic, another gasket-producing company), or whether either
or both of them have liability insurance available to pay any
claims.
Third, Garlock has relied in part on two past decisions
transferring PITWD claims under § 157(b)(5) to the district in
which a debtor was proceeding in bankruptcy.
In A.H. Robins, the Fourth Circuit upheld an order of the
United States District Court for the Eastern District of Virginia
transferring, under § 157(b)(5), thousands of PITWD claims against
a small number of non-debtor co-defendants to itself for
coordinated review while the debtor, A.H. Robins Co., Inc.,
proceeded in bankruptcy in that district. A.H. Robins, 788 F.2d at
23
1016.11 Robins was the manufacturer of the Dalkon Shield
intrauterine device, a unique product. Its co-defendants were
employees or other close associates who were contractually
indemnified by Robins. Here, the various co-defendants
manufacture, use, specify, or handle many different asbestos
products without such close relationship. Additionally, Garlock
makes no claim of indemnification here whatsoever.
In In re Dow Corning, the Sixth Circuit reversed and ordered
the United States District Court for the Eastern District of
Michigan to transfer under § 157(b)(5) a relatively small number of
non-debtor co-defendants who had asserted claims for contribution,
or announced the intent of doing so, against the debtor
manufacturer of silicone breast implants. In re Dow Corning, 86
F.3d at 498. In that case, each of the co-defendants was closely
involved in using the same material, originating with the debtor,
to make the same, singular product, sold to the same market and
incurring substantially similar injuries. This circumstance
created a unity of identity between the debtor and the co-
defendants not present here, where the co-defendants variously use
asbestos for brake friction products, insulation, gaskets, and
other uses.
Therefore, while we do not disagree that certain mass tort
11
The circuit court’s ruling remanded for clarification and to
provide notice for claimants’ objections, but otherwise affirmed.
24
claims in some circumstances might be consolidated with bankruptcy
proceedings in a single district in accordance with § 157(b)(5),12
the relationship of the co-defendants in A.H. Robins and In re Dow
Corning is distinguishable from Garlock’s asserted relationship,
through a claim for contribution, to the debtor here.
Fourth, Garlock’s contribution claim against the debtor is
based on universally-pled claims against all defendants in all
asbestos lawsuits in which Garlock appears as a co-defendant.
Garlock has never litigated a contribution claim to collection in
any of approximately 250,000 previous asbestos lawsuits in which
Garlock was a co-defendant. In the face of this criticism, Garlock
has made a late attempt to color its failure to pursue an actual
payment of contribution.13 Garlock now asserts that in past
lawsuits, the “larger” or “major” defendants, now in bankruptcy,
had been present to pay their fair share of claims and that it was
12
Some writers and commentators would bar mass tort parties from
being transferred for consolidated review under § 157(b)(5). See,
e.g., Lori J. Forlano, Why Bankruptcy “Related To” Jurisdiction
Should Not Reach Mass Tort Nondebtor Codefendants, 73 N.Y.U. L.
Rev. 1627 (1998)(arguing, generally, against consolidation on
grounds of comity and federalism). We would not go so far as to
bar such consolidation in the face of a coordinated federal
bankruptcy scheme. Instead, we would balance each case
individually, as we have herein, for the relationship or unity of
identity of the co-defendants and the debtor(s), the uniformity of
source of the injury or wrongful death, and the general status of
pending cases in the state courts and the effect a consolidation
would have on them.
13
See Reply of Garlock, Inc., to Plaintiffs’ Response, filed
December 19, 2001, at 7-8.
25
not cost-effective for Garlock to litigate the relatively small
amounts left in controversy. It is only since the Federal-Mogul
entities proceeded to Chapter 11 protection that, Garlock contends,
it must seriously proceed with its claims for contribution.
Garlock has not, however, commenced discovery in any of these
cases, but has spent its time seeking the § 157(b)(5) transfer
addressed herein. The appellees characterize that as a dilatory
intent and, if such, Garlock’s actions are tantamount to being
frivolous.
Additionally, the district judges ruling in the various cases
before us found, on the facts before them, no merit in Garlock’s
claims. One district judge, for example, noted that in his court,
Garlock’s claims were “scantily asserted” and presented no facts to
support them. As such, the contribution claims were “so tenuously
related to the bankruptcy case” as to be “virtually immaterial.”
All of the district judges ultimately found no verifiable basis in
Garlock’s claims so as to justify a mass transfer to the District
of Delaware.
We are not prepared to say that Garlock’s motives were purely
dilatory and its motions frivolous. We need not, however, decide
the issue of motivation when determining the potential for success
on the merits of Garlock’s “related to” jurisdiction assertion and
associated motion to transfer under § 157(b)(5). Given the
preliminary analysis herein, Garlock would not succeed on the
merits if granted a stay to appeal the § 157(b)(5) transfer issue.
26
Our determination in this element is sufficient to deny the
stay pending appeal; however, we will briefly address the remaining
points of analysis.
B. Whether the movant has made a showing of irreparable injury if
the stay is not granted.
We have determined that Garlock has no valid claim for
contribution against the debtor. Therefore, no irreparable harm
will ensue if a stay is not granted.
C. Whether the granting of the stay would substantially harm the
other parties.
There may be a danger of inconsistent results in the various
state and federal courts in which Garlock and the other parties
appear if these cases are not consolidated in the District of
Delaware. That is, however, the circumstance under which asbestos
litigation has proceeded for nearly 30 years.
What is certain is that delay where plaintiffs have
mesothelioma, asbestosis, or pleural disease, or where decedents’
survivors await compensation for support substantially harms those
parties.
Additionally, delay in or lengthy interruption of state court
proceedings already in progress for months or years may
substantially harm the ability of the state courts to resolve the
cases.
We therefore hold that, in this circumstance, the harm to the
27
plaintiffs in delay substantially outweighs the harm to Garlock if
not delayed.
D. Whether the granting of the stay would serve the public
interest.
Consolidation of PITWD cases related to a bankruptcy would
facilitate management of an estate in bankruptcy and potentially
provide an even-handed and fair apportionment of the bankrupt’s
estate to its creditors, including those claiming contribution in
the mass tort scenario.
Such consolidation would also deprive states and state courts
of their right to conduct proceedings brought under state law. In
a mass tort case of the scope of asbestos litigation, transferring
cases related to a bankruptcy could well result in depriving the
states of cognizance over thousands of cases. Many of these cases
are founded on well-developed state law and years of precedent and
represent a significant amount of time in individual litigation.
The negative effect on comity between the federal and state court
systems must be given some account.
Armstrong Work Industries, U.S. Gypsum, W.R. Grace and Owens
Corning are all proceeding through Chapter 11 in Delaware in
addition to Federal-Mogul. The burden of these five asbestos-
related bankruptcies and the direct claims against them alone has
resulted in the Third Circuit appointing a district judge full-time
to stewarding those cases in coordination with a bankruptcy judge.
28
The transfer of all of the PITWD claims against asbestos co-
defendants to that court has the potential to overload the court
with thousands of individual claims to resolve. It is difficult to
see how the public interest is served in that manner.
At the bottom, there is justification for aggregation, but the
tenuous relationship between Garlock and the debtor and the
insubstantial claims of contribution reflected herein do not
justify ignoring comity and loading thousands of cases on a single
district in this case.
IV. Issue Preclusion.
Garlock contends that a transfer of venue to the District of
Delaware would obtain “a ‘centralized,’ ‘efficient,’ cost-effective
application of a uniform, fair system for assessing and
compensating asbestos-related claimants” under 28 U.S.C. §
157(b)(5) and the automatic stay feature of 11 U.S.C. § 362, “to
avoid unnecessary repetition, confusion, inconsistent results in
multiple trials of common issues, cost or delay where these many
cases do not have to be multiplied.”14 In addition to seeking a
14
See Petitioner’s Emergency Motion for Stay at 3 (for cases
consolidated under Fifth Circuit Case No. 01-41327). In cases
filed at later dates and consolidated under other case numbers,
Garlock’s intent is stated in a different location. For example,
“[a] stay in this action will promote the stated congressional
public policy reflected in § 157(b)(5) of having all matters
‘related to’ bankruptcy reviewed toward implementing centralized,
efficient and expeditious proceedings conserving the debtor’s
resources and distributing the debtor’s assets for the benefit of
all creditors alike.” See Petitioner’s Emergency Motion for Stay
at 14 (for cases consolidated under Fifth Circuit Case No. 01-
29
centralized forum under federal bankruptcy laws, which, we note,
Garlock may desire as much for perceived protection from judgments
in the state courts, Garlock appears to be contemplating the
availability of coordinated federal court judgments for their
preclusive effect in future actions.
To the extent that Garlock’s contention can be read to embrace
one made more explicitly by the “Big Three” automobile
manufacturers15--that transfer to the District of Delaware
bankruptcy court would facilitate a ruling on the ability of
friction products to be a producing cause of asbestos-related
diseases, a ruling that would be used for purposes of issue
preclusion in other cases--Garlock faces formidable obstacles. As
an initial matter, we note that Garlock has not attempted to
certify as a class these and other asbestos cases--the only widely-
51209). Regardless, all of the motions reflect the same underlying
general facts, legal theory and intent.
15
The “Big Three” automobile manufacturers, who are co-defendants
in many of these same cases, are being sued as users of asbestos
friction products, such as brakes in automobiles. They moved in
the District of Delaware to transfer all such claims against them
under § 157(b)(5) for the specifically stated intent of conducting
Daubert hearings for the admission of scientific evidence and a
ruling that brake/friction products are conclusively not a possible
source of disease-producing asbestos. See Daubert v. Merrell Dow
Pharmaceuticals, Inc., 509 U.S. 579, 589 (1993). Such a ruling
would then be used for issue preclusion in future cases. Garlock
and amici have briefed the auto manufacturers’ effort from their
opposing perspectives and counsel for Ford Motor Co.,
DaimlerChrysler Corp. and General Motors Corp. has further informed
us by letter dated December 12, 2001, that the District of Delaware
has provisionally transferred only those claims to that court for
further determinations.
30
credited medium for disposing of multiple claims while barring
relitigation of resolved issues. Less well-accepted is
consolidation under Rule 42, but this approach is complicated by
the cases involved having been filed in multiple courts in diffuse
districts and by the absence of complete uniformity among parties
and interests. Even more tenuous would be resort to judicial
notice under FED. R. EVID. 201. For a party to tee up an issue for
decision in a selected court with the expectation that any rulings
would not only be referenced by subsequent courts but also applied
as binding--and in the face of inconsistent decisions previously
rendered elsewhere--is to hope for a most novel application of that
rule indeed.
But no matter how creative the procedural avenue, and in spite
of the fact that this litigation would benefit from a uniform
approach, at almost every turn this circuit has rejected attempts
at aggregation and issue preclusion in asbestos cases. Our
adversity toward group resolution sounds in our concern that no one
be deprived the right to a full and fair opportunity to litigate
their claims. In C.A. Hardy v. Johns-Manville Sales Corp., 681
F.2d 334 (5th Cir. 1982), we turned aside a district court’s order
that nonparty asbestos companies were estopped from relitigating
issues of dangerousness and causation as violative of the
fundamental right to trial by jury. We reached this conclusion
based on the manufacturers’ each having an interest in the
31
plaintiffs proving the same set of facts. Indeed, in Hardy we went
so far as to conclude that the presence of inconsistent findings in
other cases on the same questions at issue in Hardy made the
application of collateral estoppel highly problematic even as to
the parties themselves. Of course Garlock need not be reminded of
Hardy’s place in this circuit’s jurisprudence for it was one of the
defendants that opposed any attempt to bar the relitigation of key
dispositive issues.
The passage of time has not weakened the teachings of Hardy.
In re Fibreboard, 893 F.2d 706 (5th Cir. 1990), saw this court
issue a writ of mandamus against the trial of a representative
group of plaintiffs on the issues of duty and damages. There, we
said that adherence to state substantive law and to the Seventh
Amendment right to trial by jury would not tolerate making the
resolution of a handful of claims binding as to defendant asbestos
manufacturers’ liability with respect to all plaintiffs. In Cimino
v. Raymark Industries, Inc., 151 F.3d 297 (5th Cir. 1998), we again
revisited the same district court’s revised effort at mass
resolution. There, we emphasized that federal rules providing for
aggregation of claims--specifically, FED. R. CIV. P. 23 and 42--
cannot override the necessity of proving causation as to each
defendant, a requirement of the state law providing the cause of
action and of the right to trial by jury. As we did in Fibreboard,
we refused to tolerate deviation from fundamental principles of due
32
process simply because asbestos cases threatened to swamp the
resources of the federal courts.
The closest this circuit has come to utilization of issue
preclusion in the asbestos context is Jenkins v. Raymark, 831 F.2d
550 (5th Cir. 1987). In that case, a certified class of 753
claimants were permitted to try common issues in a single trial,
the result of which was applicable to the class. The procedure
approved in Jenkins, however, still required individual jury
determinations of causation and damages.
The efficiencies to be obtained from issue preclusion,
therefore, cannot in this circuit serve as a basis for the transfer
of cases under 28 U.S.C. § 157(b)(5).
V. Abstention.
A § 157(b)(5) motion ordinarily requires an abstention
analysis. In re Dow Corning, 86 F.3d 482, 497 (6th Cir. 1996). 28
U.S.C. § 1334 provides for two types of abstention: discretionary
abstention under § 1334(c)(1) and mandatory abstention under §
1334(c)(2). See, e.g., Broyles v. U.S. Gypsum Co., 266 B.R. 778
(E.D. Tex. 2001) (finding both doctrines apply, as well as
equitable remand, in circumstances not involving a transfer under
28 U.S.C. § 157(b)(5)).
We agree with the district judge in Corpus Christi. Any
abstention issues remaining in these cases regarding claims now
before the bankruptcy court in the District of Delaware may be
33
decided by that district court.
VI. Conclusion.
We do not disagree that the transfer provisions of 28 U.S.C.
§ 157(b)(5) may be applicable to multiple, non-debtor co-defendants
in a mass tort case. Our holding today is that Garlock, in these
cases and under these circumstances, has not shown that such a
transfer is appropriate.
It is hereby ORDERED that,
The Petitioner’s Motions for Stay under FED. R. APP. P. 8 are
DENIED. It is further ORDERED that,
The temporary stays issued in our consolidated Orders are
hereby dissolved.
34