United States District Court, D. Delaware
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.
Elizabeth Sieg, Esq., of MCGUIREWOODS LLP, Richmond, VA.
Christian J. Singewald, Esq., of WHITE & WILLIAMS LLP,
Wilmington, DE. Attorneys for Appellant Ford Motor Company.
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.
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.
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.
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
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.
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.
U.S. District Judge.
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.
Honeywell, joined by Ford (together, "Appellants")
filed a request (A 1-154) 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. 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("TAC") and the Future Claimants
Representatives ("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.
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)
reasons stated below, the Court will affirm the Bankruptcy
Court's Access Decision.
The Parties and the 2019 Orders
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 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.
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 . . .
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.
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,
which together standardized disclosures required by
Bankruptcy Rule 2019 for the asbestos cases filed in the
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.
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.
Appeals of the 2019 Orders
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.
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").
Garlock's Motion for Access
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
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). Certain asbestos claimants'
committees, along with plaintiffs' law firms, filed
objections, as did certain debtors. Garlock subsequently
filed amended motions. Judge Fitzgerald denied the
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
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.").
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
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." (Id. at 7)
The Access Decision
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)
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
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)
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").
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.
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)
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)