UNITED STATES GYPSUM COMPANY et al v. G-I HOLDINGS, INC.

Filing 19

OPINION. Signed by Judge Dennis M. Cavanaugh on 6/26/13. (gmd, )

NOT FOR PUBLICATION
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY

In re:

:

G-l Holdings, INC., et al.,
(f/kla GAF. Corporation)

:

Hon. Dennis M. Cavanaugh

OPINION
Bankruptcy Case No. 01-30135 (RG)
and No. 01-38790 (RG)

Debtor.

Civil Action No. 2:12-6933

UNITED STATES GYPUM COMPANY,
PFIZER, INC. and QUIGLEY COMPANY,
INC.

Appellant,
v.
G-I Holdings, INC.,

Appellee.

DENNIS M. CAVANAUGH, U.S,D,J.:
This matter comes before the Court upon appeal by United States Gypsum Company,
Pfizer, Inc. and Quigley Company Inc. (hereinafter “Appellants” or the “Former Members”) of
the Bankruptcy Court’s August 13, 2012 Opinion (“the Opinion”) finding in favor of Appellee
G-I Holdings (hereinafter “Appellee” or “G-I”) on its motion for Summary Judgment. Pursuant
The Bankruptcy Court referred to U.S. Gypsum, Pfizer and Quigley as the “Former Members” of the
Center for Claims Resolution, thus for consistency’s sake this Court will do the same.

to FED. R. Civ. P 78, no oral argument was heard. Based on the following and for the reasons
expressed herein, Appellants appeal is denied and the Bankruptcy Court’s Opinion

I

is

affirmed.

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BACKGROUND

Appellants, Appellee G-I and other companies were parties to asbestos personal injury
lawsuits. In an

effort

to resolve these lawsuits efficiently, the companies entered into a contract

where they agreed to allocate the costs of settling the thousands of asbestos personal
claims against them in

an

agreed upon formula. Under the contract, the parties agreed to

injury

create a

claims handling organization, the Center for Claims Resolution (“CCR”), that would manage the
claims and send out bills to the contracting parties for their share of settlement payments owed
under the contractually-agreed formula.
G-I subsequently filed for bankruptcy on January 5, 2001. During the course of 0-I’s
bankruptcy

proceeding, a payment dispute arose between the CCR and 0-I, which was settled.

The Former Members of the CCR objected to this settlement; because the Former Members paid
an allocated share of G-I’s contractual liability under the Producer Agreement, they filed a claim
against 0-I for the amounts in paid on 0-I’s behalf for moneys they believe were owed to them,
not the CCR. After initially objecting to the claims of the Former Members in the Bankruptcy
Court, 0-I filed a motion for summary judgment in support of its objection. On August 13, 2012,
the Bankruptcy Court issued its Opinion granting the motion for summary judgment in favor of
0-I. The Bankruptcy Court made the following determinations:
1. The Former Members did not have claims against 0-I because they had waived, under
the Producer Agreement, claims against other CCR members for contribution and

indemnity with

respect to

“asbestos-related claims” (Opinion 36);

2

This Court need not recite the entire procedural and factual history of this case, as the Hon. Rosemary Gambardella
of the Bankruptcy Court did an efficient and clear job in the opinion below. For a more complete background, see In
Re: G-1 Holdings, Inc. et al, Bankruptcy Court No. 01-30135 (RG) and 01-3 8790 (RG) (ECF No. 1-1).

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2. The claims of the Former Members, under Delaware law, are “derivative” of claims of

the CCR, rather than ‘direct” claims (Opinion 50-51; and

3. Allowing the Former Members to recover on claims against G-I would constitute an
‘impermissible double recovery” against G-I, since CR had already resolved its claims
against G-I pursuant to the CCR settlement (Opinion 52).
Appellant U.S. Gypsum filed a Notice of Appeal on October 26, 2012 (ECF No. 1) and a
supporting brief on November 26, 2012. (Appellant’s Br., ECF No. 5). Appellants Pfizer and
Quigley adopted the arguments and briefs of U.S. Gypsum, for both the

moving

brief and the

reply brief. (Docket No. l2-cv-6935, November 26, 2012, ECF No. 6). Appellee G-l holdings
filed a Response Brief on December 10, 2012. (Appellee’s Br.. ECF No. 8). Appellants filed a
Reply Brief on December 21, 2012. (Appellant’s Reply, ECF No, 14).

IL

STANDARD OF REVIEW
This Court has jurisdiction over final judgments and orders of the Bankruptcy Court

pursuant to 28 U.S.C.

§

158.

A district court applies a “clearly erroneous” standard to the

bankruptcy judge’s findings of fact and reviews the bankruptcy judge’s legal conclusions de
novo. See FED. R. BANKR. P. 8013; In re Cohn, 54 F.3d 1108, 1113 (3d Cir. 1995). A factual
finding is clearly erroneous if, in reviewing all the evidence, the reviewing court is left with the
“definite and firm conviction that a mistake has been committed,” even if there is evidence to
support the finding.

In re Allegheny Int’l, Inc., 333 U.S. 869, 173 (3d. Cir. 1992); (quoting

United States v. U.S. Gypsum Co., 333 U.S. 364, 395 (1948)).

A district court reviews the

bankruptcy court’s “exercise of discretion for abuse thereof.” Manus Corp. v. NRG Energy. Inc..
(In re O’Brien Envtl. Energy, Inc.), 188 F.3d 116, 122 (3d. Cir. 1999).

“A bankruptcy court

abuses its discretion when its ruling is founded on an error of law or a misapplication of law to
the facts.” Id.

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III.

DISCUSSION
The sole issue on appeal is whether the Former Members of the CCR can asseil a breach

of contract claim against G-I. As a threshold matter, the Bankruptcy Court found that:
the Producer Agreement signatories intended to establish a cooperative, collective
process for allocating asbestos liability, and in furtherance of that process,
delegated to the new corporate entity the exclusive right to seek collection from a
member that did not make a payment required under the Producer Agreement’s
allocation of a pro rata share of liability and expenses.
(Opinion 33). This Court agrees; furthermore, when interpreting contracts, priority must be given
to the intention at the time the contract is formed. See E.1, du Pont de Nemours & Co. v. Shell
Oil Co., 498 A. 2d 1108, 1114 (Del. 1985): see also GMG Capital lnvs.. LLC v. Athenian
Venture Partners I, L.P., 36 A.3d 776, 779 (Del. 2012) (giving priority to parties’ intentions as
reflected in the four corners of the contract); Lorillard Tobacco Co. v. Am. Legacy Found., 903
A.2d 728, 738 (Del. 2006) (finding that courts are to “effectuate the parties’ intent”); Hfn, Inc. v.
Intel Corp., 2007 WL 2801393, at *9 (Del. Ch. May 2, 2007) (quoting Eagle Indus.. Inc. v.
DeVilbiss Health Care, Inc., 702 A.2d 1228, 1232 (Del, 1997)); Comrie v. Enterasys Networks,
Inc., 837 A.2d 1 (Del. Ch. 2003) (holding that attempting, within reason, to fulfill the reasonable
shared expectations of parties at the time they contracted is the primary goal of contract
interpretation). Courts should also give effect to all contract provisions. In E.l. du Pont de
Nemours & Co. v. Shell Oil Co., the Delaware Supreme Court held that:
[i]n upholding the intentions of the parties, a court must construe the agreement as
a whole, giving effect to all provisions therein.
Moreover, the meaning which
arises from a particular portion of an agreement cannot control the meaning of the
entire agreement where such inference runs counter to the agreements overall
scheme or plan
To do so would be to violate the cardinal rule of contract
construction that, where possible, a court should give effect to all contract
provisions.
.

.

.

.

.

4

.

.

498 A.2d at 1113-14 (internal citations omitted). The Bankruptcy Court stated that ‘[tjhe
meaning

from

contradict the

one

provision

meaning

of

of

the

a

contract

entire

cannot

contract.

control if that

provision’s

meaning

would

Courts should give effect to all contract

provisions.” (Opinion 32). While Appellants argue that the Bankruptcy Court erred in finding
that they could not assert a claim for breach of contract, this Court agrees with the Bankruptcy
Court and finds that the Producer Agreement delegated the right to enforce the claims in question
to

the CCR. As Appellees state, “the clear purpose of the Producer Agreement was

costly and time-consuming litigation among its members and.

.

.

to

eliminate

to allow Participating

Producers to resolve asbestos-related claims expeditiously and efficiently.” (Appellee’s Br. 16).
Each provision of the contract should be read through this lens. The Bankruptcy Court undertook
a thorough examination of the contractual provisions of the Producer Agreement, and found that
in order to effectuate the parties’ intent, Participating Producers, through the Producer
Agreement “(i) elected to rely exclusively on the CCR to settle and pay asbestos claims and to
collect payments from members, and (ii) agreed that upon termination of CCR membership,
former members would continue to be bound by obligations incurred during the period it was a
member,” (Opinion 37).
Although the Court agrees with the reasoning of the Bankruptcy Court and affirms the
holding that the Appellants were contractually barred from pursuing a breach of contract claim
against Appellee independent

of

the CCR, the Court will address Appellant’s two main

3
arguments.
First, Appellants argue that the Bankruptcy Court ignored the plain language of Section X
of the Producer Agreement, which they argue specifically provides that the Former Members
Appellants also make arguments regarding the Bankruptcy Court’s discussion of direct versus derivative claims
and the problem of double recovery.” Because this Court agrees with the Bankruptcy Court that the contract
language bars Appellants claim, this Court does not find it necessary to address these issues.

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have a right to bring a breach of contract claim. Section X is called “Third Party Rights” and
provides:
The Agreement is intended to confer rights and benefits only upon Participating
Producers, Supporting Insurers that are paying unallocated expenses incurred by
the Center and the Center, and is not intended to confer any rights or benefits
upon any other persons. No person other than the Center, a signatory hereto or a
Supporting Insurer that is paying unallocated expenses incurred by the Center
shall have any legally enforceable rights under the Agreement. All rights of action
for any breach of this Agreement by any signatory hereto are hereby reserved to
the Center, Participating Producers and to Supporting Insurers that are paying
unallocated expenses incurred by the Center.
Appellants argue “if the parties to the Producer Agreement intended the Bankruptcy
Court’s incorrect interpretation of Section X, the provision would not have explicitly stated that
the member companies have the right to bring breach of contract claims against each other.”
(Appellant’s Br. 16-17). However, the Bankruptcy Court held that “when read in its entirety,

§X

clearly and unambiguously limits the rights of third parties and avoids the creation of unintended
third party beneficiaries.” (Opinion 36-37). This Court agrees. Section X is titled “Third Party
Rights” and the language is meant to limit just that. Read in a vacuum, the final sentence does
reserve a cause of action for the Center in addition to the Participating Producers, but this
reading cannot hold water when read in concert with the other provisions and when taken in the
context of the section’s title. Appellees argue:
Where, as here, the Producer Agreement has created a payment obligation to the
CCR and a mechanism by which the CCR and only the CCR may enforce that
obligation, nothing in the non-specific language of the last sentence of Section X
somehow empowers a Participating Producer to bring its own suit to enforce the
same obligation.
—

—

(Appellee’s Br. 25). This Court agrees.
Appellants next argue that the Bankruptcy Court “erred in finding that a permissible, but
not mandatory, arbitration provision in the Producer Agreement barred members from suing each

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other for breach of contract.” (Appellant’s Br. 18). Again, this Court disagrees with Appellants
argument. In keeping with the purpose of the Producer Agreement, the Former Members
delegated to the CCR enforcement of the share payment provisions, and Section XIV ¶ 4 gives
the CCR the power of enforcement to the Center and the Center’s Board of Directors on belia
of the Center’s Participating Producers. While Appellants argue that this provision is
permissible, there is no other provision in the Producer Agreement that establishes any remedy
for breach of a payment obligation, and this section clearly provides an express remedy. Indeed
the CCR has already exercised that remedy on behalf of the Former Members. Again reading the
contract as a whole, this Court is not convinced that this provision is merely permitting
arbitration for a breach of a payment obligation while leaving open the

option

for independent

members to bypass the sole authority of the CCR to remedy it on their own.

fl

CONCLUSION
For the foregoing reasons, Appellants appeal is denied and the Bankruptcy Court’s

Opinion is affirmed. An appropriate Order follows this Opinion.

Dennis M. Cavanau
Date:
Original:
cc:

June
2013
Clerk’s Office
Hon. Joseph A. Dickson, U.S.M.J.
All Counsel of Record
File

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