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In re Seeking Access to 2019 Statements

United States District Court, D. Delaware

March 27, 2018

IN RE Motions Seeking Access to 2019 Statements.

          Peter John Sacripanti, Esq., John J. Calandra, Esq., and Darren Azman, Esq., of McDERMOTT WILL & EMERY LLP, New York, NY. Justin K. Edelson, Esq., of POLSINELLI PC, Wilmington, DE. Attorneys for Appellant Honeywell International Inc.

          K. Elizabeth Sieg, Esq., of MCGUIREWOODS LLP, Richmond, VA. Christian J. Singewald, Esq., of WHITE & WILLIAMS LLP, Wilmington, DE. Attorneys for Appellant Ford Motor Company.

          Mark Minuti, Esq., of SAUL EWING LLP, Wilmington DE. Adam H. Isenberg, Esq., of SAUL EWING LLP, Philadelphia, PA. Attorneys for Appellee Owens Corning Sales, LLC, f/k/a Owens Corning, and its Affiliated Reorganized Debtors.

          Ann C. McMillan, Esq., Kevin C. Maclay, Esq., and Todd E. Phillips, Esq., of CAPLIN & DRYSDALE, CHARTERED, Washington DC. Anthony M. Saccullo, Esq., and Thomas H. Kovach, Esq., of A.M. SACCULLO LEGAL, LLC, Bear, DE. Attorneys for Appellees/Cross-Appellants Trust Advisory Committees.

          James L. Patton, Jr., Esq., Edwin J. Harren, Esq., and Sharon M. Zieg, Esq., of YOUNG CONAWAY STARGATT & TAYLOR, LLP, Wilmington, DE. Attorneys for Appellees/Cross-Appellants Future Claimants ' Representatives.

          Joseph D. Frank, Esq., and Reed Heiligman, Esq., of FRANKGECKER LLP, Chicago, IL. Attorneys for Appellee/Cross-Appellant The Combustion Engineering 524(g) Asbestos PI Trust Advisory Committee

          Nicholas E. Skiles, Esq., of SW ARTZ CAMPBELL LLC, Wilmington, DE. Cory L. Andrews, Esq., and Mark S. Chenoweth, Esq., WASHINGTON LEGAL FOUNDATION, Washington DC. Attorneys for Amicus Curiae Washington Legal Foundation.

          Raeann Warner, Esq., of JACOBS & CRUMPLAR, P.A., Wilmington, DE. Robert S. Peck, Esq., of CENTER FOR CONSTITUTIONAL LITIGATION, P.C., New York, NY. Attorneys for Amicus Curiae The American Association for Justice.


          STARK, U.S. District Judge.

         This appeal relates to nine Delaware bankruptcy cases, each commenced in connection with the respective debtors' asbestos-related liabilities ("Consolidated Cases"). The appeal arises from the most recent attempt to access thousands of exhibits ("2019 Exhibits") that were submitted to the Bankruptcy Court pursuant to Federal Rule of Bankruptcy Procedure 2019 in connection with administering the nine asbestos bankruptcies. Consistent with a series of orders entered by the Bankruptcy Court in implementing Rule 2019 (the "2019 Orders"), the 2019 Exhibits are in the possession of the Clerk of the Bankruptcy Court, but are not available on the public docket.

         Appellant Honeywell, joined by Ford (together, "Appellants") filed a request (A 1-154)[1] in each of the Consolidated Cases seeking unlimited access to the 2019 Exhibits, even though all but one of the nine Consolidated Cases are closed.[2] Appellants contend that they, like any entity, are entitled to indefinite access to the 2019 Exhibits, to use them for any purpose, including, but not limited to, investigating potential fraud in the claims process and advancing Appellants' legislative and lobbying activities. Appellees - including various Trust Advisory Committees[3]("TAC") and the Future Claimants Representatives[4] ("FCR") (collectively, "Appellees") -opposed the request, on grounds including that Appellants' admitted purposes for requesting access to the 2019 Exhibits are improper and, anyway, the 2019 Exhibits are useless for such purposes. (See A178)[5]

         On November 8, 2016, the Bankruptcy Court entered its opinion and order in each of the Consolidated Cases, granting Appellants limited access to the 2019 Exhibits for the purpose of investigating potential fraud in the claims process; the Bankruptcy Court imposed additional limitations on access as well. In re Owens Corning, 560 B.R. 229 (Bankr. D. Del. 2016) (hereinafter, "Access Decision"). Because Appellants want unlimited access to the 2019 Exhibits, they have appealed the Bankruptcy Court's decision "to the extent that the Opinion and Order restrict Appellants' ability to access and use the 2019 Exhibits." (D.I. 16 at 1) Appellees have cross-appealed on the basis that the Bankruptcy Court should have denied Appellants access to the 2019 Exhibits altogether. (See D.I. 22)

         For the reasons stated below, the Court will affirm the Bankruptcy Court's Access Decision.

         I. BACKGROUND

         A. The Parties and the 2019 Orders

         Appellant Honeywell is a diversified technology and manufacturing company which has been a global supplier of automotive brake friction materials and aftermarket brake products. Honeywell is obligated to fund all distributions which the North American Refractory Company ("NARCO") Trust[6] makes, up to capped amounts (which exceed $100 million annually), and all of the NARCO Trust's expenses. (A20, ¶¶ 3-5) Appellant Ford is an automobile manufacturing company. It has been named as a defendant in asbestos cases by plaintiffs claiming to have worked with or around chrysotile-containing brake pads. Ford joined Honeywell's motion for access.

         Appellants filed a motion seeking access to all 2019 Exhibits submitted in the nine Consolidated Cases. All nine of the Consolidated Cases began in the 2000s. Under the version of Bankruptcy Rule 2019 in effect at that time, a 2019 Statement (when required) needed to contain certain identifying information (e.g., name and address, nature and amount of claim or interest, etc.) about the creditors and equity holders being represented by the entity preparing the 2019 Statement (e.g., a law firm). See Fed. R. Bankr. P. 2019 (amended 2011). Specifically, Rule 2019 provided:

every entity or committee representing more than one creditor . . . shall file a verified statement setting forth (1) the name and address of the creditor . . .; (2) the nature and amount of the claim or interest and the time of acquisition thereof unless it is alleged to have been acquired more than one year prior to the filing of the petition; (3) a recital of the pertinent facts and circumstances in connection with the employment of the entity . . ., and (4) with reference to the time of the employment of the entity, ... the amounts of claims or interests owned by the entity, . . . the times when acquired, the amounts paid therefor, and any sales or other disposition thereof. The statement shall include a copy of the instrument, if any, whereby the entity ... is empowered to act on behalf of creditors . . .

         Compliance with Rule 2019 in mass tort cases presents significant logistical challenges, particularly for law firms that represent large rosters of clients. These firms were required to prepare statements ("Rule 2019 Statements") and Exhibits with the information listed in the Rule.

         In 2004 and 2005, Bankruptcy Judge Judith K. Fitzgerald was assigned to nearly all of the asbestos bankruptcies filed within the Third Circuit, including the Consolidated Cases. In the course of administering these cases, Judge Fitzgerald determined that because the 2019 Exhibits contain personal-identifying information of potential asbestos claimants, disclosure of that information on the electronic docket posed a risk to privacy interests and presented the potential for identity theft. On August 25, 2004, Judge Fitzgerald entered the first in a series of the 2019 Orders, [7] which together standardized disclosures required by Bankruptcy Rule 2019 for the asbestos cases filed in the Third Circuit.

         Pursuant to the 2019 Orders, lawyers representing multiple claimants were required to file 2019 Statements, which included the name and address of the law firm but excluded any substantive information. The 2019 Statements were electronically filed and available on the public docket. These lawyers were also required to submit exhibits to the 2019 Statements, which contained substantive information about their clients (and potential clients) and their clients' claims (and potential claims). The 2019 Exhibits - which might include full social security numbers and names and extent of disease conditions - were submitted to the Clerk of the Bankruptcy Court on compact disc (CD). Unlike the 2019 Statements, the 2019 Exhibits were not electronically docketed.

         The 2019 Orders did not, however, seal the 2019 Exhibits. Rather, the 2019 Orders regulated access to the 2019 Exhibits, in light of privacy concerns, and established a procedure by which a party seeking access to the 2019 Exhibits may request it. (See Flintkote D.I. 402, 10/6/04 Hr'g. Tr. at 55)

         B. Appeals of the 2019 Orders

         The procedures established by Judge Fitzgerald in her 2019 Orders have been reviewed and approved by several courts within the Third Circuit. See In re Kaiser Aluminum Corp., 327 B.R. 554 (D. Del. 2005); In re Pittsburgh Corning Corp., 2005 WL 6128987 (W.D. Pa. Sept. 27, 2005), aff'd, In re Pittsburgh Corning Corp., 260 Fed.Appx. 463 (3d Cir. 2008). For instance, after the 2019 Orders were entered, certain insurers contended that the 2019 Orders, as implemented in the Kaiser and Flintkote bankruptcies, were erroneous. See Kaiser, 327 B.R. at 557. In the course of determining that the insurers did not have standing to challenge the 2019 Orders, former District Judge Farnan of this Court stated, "even if the Court concludes that Appellants have standing to challenge the Revised Rule 2019 Orders, the Court concludes that the Bankruptcy Court did not err in . . . restricting access to the Rule 2019 information." Id. at 559. The Court added that "the Revised 2019 Orders issued by Judge Fitzgerald . . . comport with the requirements of Rule 2019, while taking into consideration the complexities of mass tort litigation." Id. Judge Farnan emphasized that "the Bankruptcy Court is regulating access to the information because of privacy concerns" and found that the 2019 Orders "strike the appropriate balance between maintaining the public's right to access the Rule 2019 information and ensuring that the information is not misused." Id. at 560.

         Insurers similarly appealed the 2019 Orders entered in the Pittsburgh Corning bankruptcy. The District Court for the Western District of Pennsylvania dismissed that appeal for lack of standing. See Pittsburgh Corning, 2005 WL 6128987, at *10. The Third Circuit affirmed. See Pittsburgh Corning, 260 Fed.Appx. at 465 (finding "no error in the District Court's resolution of Appellants' access challenge").

         C. Garlock's Motion for Access

         Litigation over access to the 2019 Exhibits from the Consolidated Cases arose again in 2009, when an asbestos defendant, Garlock Sealing Technologies, LLC ("Garlock"), filed a motion for access in the Pittsburgh Corning bankruptcy, in connection with its objections to confirmation of the Pittsburgh Corning bankruptcy plan. The Bankruptcy Court denied Garlock's motion for access in 2010.[8]

         A year later, Garlock, by then itself a debtor in an asbestos bankruptcy - pending in the Western District of North Carolina, No. 10-31607 (Bankr. W.D. N.C. ) - filed a new series of motions seeking access to the 2019 Exhibits submitted in each of the Consolidated Cases (and also in three Pennsylvania bankruptcy cases, which, like the Consolidated Cases, were were all before Judge Fitzgerald at the time).[9] Certain asbestos claimants' committees, along with plaintiffs' law firms, filed objections, as did certain debtors. Garlock subsequently filed amended motions. Judge Fitzgerald denied the motions.[10]

         In doing so, Judge Fitzgerald explained:

In the context of bankruptcy asbestos personal injury cases, when a 2019 is filed, a lawyer typically has a number of clients who have been, or assert that they have been, exposed to asbestos and who often may have sustained those exposures in multiple contexts. For example, an employee of one company may have worked with products of multiple asbestos manufacturers, producers, or distributors or may have worked for more than one asbestos company. In addition, individuals will often seek legal advice notwithstanding the absence of disease or symptoms, simply because of the possibility of exposure and because the latency period for certain asbestos diseases can be decades. Thus, notwithstanding the use of the word "creditor" in Rule 2019, individuals seeking legal counsel with respect to asbestos exposure may or may not have current claims and may or may not ever qualify as a claimant under § 524(g). Nonetheless, they are represented by an attorney who is required to file a 2019 statement listing all those he represents who are or may be claimants, even if the claims are never allowable or allowed.
Statements under 2019 are attorney statements of authority to represent multiple clients as listed thereon. They are not claims and are not affirmative statements by the clients themselves. Counsel are in a predicament. If they fail to file the statements (or exclude a client who has not yet but eventually does assert a claim against the debtor, or neglect to amend a 2019 when taking on a new client or losing a client), counsel may face substantial penalties that could prejudice their clients. For example, Rule 2019 provides that if the court finds a failure to comply with Rule 2019(a) "or with any other applicable law regulating the activities and personnel of any entity ... the court may refuse to permit that entity ... to be heard further ..." The court may also "hold invalid any authority, acceptance, rejection, or objection given, procured, or received by an entity'" that has not complied. Even from the enumerated penalties, it is clear that the Rule applies to regulate conduct in the specific bankruptcy case and no other.
Rule 2019 is not a discovery tool but is to ensure that plans are negotiated and voted on by those authorized to act on behalf of real parties in interest in a case. The 2019 statements are not, and do not substitute for, proofs of claim or ballots of creditors who vote on a plan of reorganization.

ACandS, 462 B.R. at 96 (emphasis in original; internal citations and footnotes omitted); see also id. at 93 n.6 ("We note that the mere inclusion of a client on a 2019 in an asbestos case does not necessarily mean that the client filed or will file a claim or that any claim will be allowed once presented to the trust."); id. at 94 ("2019 statements are representations by counsel to a court as to who their clients are. The statements are not claims.").

         On appeal, this Court reversed, concluding that "access should be provided" but "subject to certain limitations." In re Motions for Access of Garlock Sealing Technologies LLC, 488 B.R. 281, 286 (D. Del. 2013) ("Garlock"). Those restrictions included: (1) Garlock would be provided access to the 2019 Exhibits "solely for the purpose of using them in connection with the estimation proceedings in its own bankruptcy case;'" (2) "Garlock may not publicly disclose information contained in the 2019 Exhibits except in an aggregate format that does not identify any individual;" (3) "before there is any disclosure of the information Garlock divines from the 2019 Exhibits, Garlock must first propose to the North Carolina Bankruptcy Court an appropriate form of protective order for that Court to consider;" and (4) "Garlock shall not be granted access to . . . retention agreements." Id. at 302. This Court subsequently entered an implementing order, which provided as follows:

To the extent Retention Agreements are inadvertently provided to Garlock, Garlock shall not review such Retention Agreements, shall promptly destroy such Retention Agreements, and shall not provide them to any other person or entity or use them for any purpose whatsoever.
This Order authorizes Garlock to use such 2019 Exhibits solely in connection with the estimation proceedings in Garlock's chapter 11 bankruptcy cases . . . and neither the 2019 Exhibits nor the information contained therein may be used for any other purpose.
Garlock shall not disclose publicly the information contained in any 2019 Exhibit except in an aggregate format that does not identify any individual represented person.
Recognizing that Garlock has requested the North Carolina Bankruptcy Court to enter a proposed protective order pursuant to the Protective Order Motion, public disclosure of the information in any 2019 Exhibit shall be subject to the terms of a protective order entered by the North Carolina Bankruptcy Court that is consistent with this Court's Opinion and Order and the terms of this Order.

(Civ. No. 11-1130-LPS, D.I. 67 at ¶¶ 1-4) On March 19, 2013, the WDPA District Court issued an order adopting this Court's opinion in Garlock and granting Garlock access to the 2019 Exhibits filed in the three WDPA bankruptcy cases, subject to certain restrictions. See In re Pittsburgh Corning Corp., Civ. No. 11-1406-NBF, D.I. 33 (W.D.P.A. Mar. 19, 2013); In re Mid-Valley, Civ. No. 11-1439-NBF, D.I. 25 (W.D.P.A. Mar. 19, 2013); In re North American Refractories Co., Civ. No. 11-1452, D.I. 30 (W.D.P.A. Mar. 19, 2013) (together, "Garlock II'').

         Following entry of the orders by the Delaware and WDPA District Courts, in the Garlock and Garlock II cases, respectively, on remand Judge Fitzgerald established a protocol for the production of 2019 Exhibits ("Protocol Order'). (WRG D.I. 30490) The Protocol Order made clear that (1) "Garlock may not access retention agreements, exemplars or their equivalents;'" (2) "Garlock may not use the 2019 Exhibits or their contents for any purpose other than the Liability Estimation in the NCWB Proceedings;" and (3) "Garlock may not disclose the identity of any individual listed in any of the 2019 Exhibits." (Id. at 4-5) The Protocol Order also designated a special master, who was instructed (among other things) to "review the file [going to Garlock] to ensure that the document does not list more than the last four digits of an individual's social security number."[11] (Id. at 7)

         D. The Access Decision

         Honeywell and Ford filed their motions for access in the Consolidated Cases on June 30, 2016. (A 1-A 154) Honeywell and Ford seek use of the 2019 Exhibits by "any entity, " not just themselves. (See Al 8) Honeywell stated that it intended to use the information "to review and analyze all aspects of the NARCO Trust's operations, including, without limitation, its claims processing procedures and the claims submitted to the NARCO Trust under the individual review and expedited review processes. The valuable information contained in the 2019 Exhibits will help to ensure that the purpose of the NARCO Trust, which is to promptly pay holders of 'valid' claims, is fulfilled . . . ." (A4-A5) Both Honeywell and Ford also seek to use the 2019 Exhibits for unspecified lobbying efforts. (A336, 10/14/16 Hr'g Tr. at 35; D.I. 52 at 31)

         The NARCO TAC filed an objection to Honeywell and Ford's motion for access, which the other TACs, the FCRs, and various other parties joined. On October 14, 2016, the Bankruptcy Court heard oral argument on the motion for access. (A332-481)

         On December 1, 2016, the Bankruptcy Court entered the Access Decision. Recognizing this Court's ruling in Garlock, the Bankruptcy Court looked to whether Appellants had articulated a proper purpose for access. See 560 B.R. at 233-34. Reviewing Third Circuit case law, the Bankruptcy Court found no precedent for unlimited use of 2019 materials outside of bankruptcy proceedings and no precedent holding that lobbying and legislative efforts constitute a proper use. See Id. at 237. The Bankruptcy Court determined that Appellants were entitled to access the 2019 Exhibits only for the limited purpose of investigating fraud in the claims process. See Id. Accordingly, the Bankruptcy Court set certain limitations to protect individuals. In particular, the Bankruptcy Court held that access would be granted solely to Honeywell and Ford, for a three-month period, after which the exhibits had to be destroyed. See Id. Appellants were further prohibited from sharing the identity of individuals by name or other identifying means with the NARCO Trust. See Id. Finally, the Bankruptcy Court determined it appropriate to appoint a facilitator to oversee production of the 2019 Exhibits, including the removal of the retention agreements and all but the last four digits of social security numbers, and imposed the costs associated with the efforts of the facilitator on Appellants. (See id.; ACandS D.I. 3810)

         On November 22, 2016, Honeywell and Ford filed notices appealing the Access Decision to the District Court (the "Notices of Appeal"). In addition, on November 23, 2016, Honeywell moved to stay the Access Decision pending resolution of this appeal (otherwise the three months of access would have expired), which the Bankruptcy Court granted on December 1, 2016. (ACandS D.I. 3835; see also D.I. 46 (denying as moot stay motion filed in this Court)) On December 6, 2016, the TACs and FCRs filed notices of cross-appeal of the Access Decision (the "Notices of Cross Appeals" and, together with the Notices of Appeal, the "Appeals").

         Collectively, the Appeals of the Access Decision have generated 45 separate cases before the District Court. By order entered May 24, 2017 (D.I. 15), the Appeals are consolidated for procedural purposes under Civ. No. 16-1078-LPS.

         Because Appellants want unlimited access to the 2019 Exhibits, they have appealed the Bankruptcy Court's decision "to the extent that the Opinion and Order [i.e., the Access Decision] restrict Appellants' ability to access and use the 2019 Exhibits." (D.I. 16 at 1) In turn, the FCR and TAC Appellees' have cross-appealed based on their contention that the Bankruptcy Court should not have provided Appellants any access to the 2019 Exhibits. (See D.I. 22) Appellee Owens Corning, a former debtor whose bankruptcy is now closed, takes no position on the merits of the issues that are the subject of the Appeals. But it has appeared solely for the purpose of arguing that if access is granted, and if costs are incurred in connection with providing Appellants such access, none of the debtors in the Consolidated Cases (including Owens Corning) should be required to bear any of those expenses. (D.I. 21 at 6) Two amici -Washington Legal Foundation and American Association for Justice - have filed competing amicus briefs. (See D.I. 27, 31)

         The Appeals are fully briefed. (See D.I. 16, 17, 21, 22, 23, 34, 35, 37, 39) On March 7, 2018, the Court held oral argument. (D.I. 52)

         II. ...

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