Summary
allowing intervenor to adopt “claims already asserted” by plaintiff where no prejudice would be caused to either party
Summary of this case from Windsor v. United StatesOpinion
01 Civ. 8539 (RWS)
November 25, 2003
ELIHU INSELBUCH, ESQ., RITA C. TOBIN, ESQ., CAPLIN DRYSDALE, CHARTERED, New York, NY, Of Counsel for Plaintiff
CAPLIN DRYSDALE, CHARTERED, Washington, DC, Of Counsel for Plaintiff
TREVOR W. SWETT, ESQ., NATHAN D. FINCH, ESQ., MAX C. HEERMAN, ESQ., Of Counsel for Plaintiff
BARRY R. OSTRAGER, ESQ., MARK THOMPSON, ESQ., DAVID J. WOLL, ESQ., SIMPSON THACHER BARTLETT, New York, NY, Of Counsel for Defendant
DAVID R. GROSS, ESQ., WHITNEY R. CHELNIK, ESQ., SAIBER, SCHLESINGER, SATZ GOLDSTEIN, Newark, NJ, Of Counsel for Intervenor
KEVIN E. IRWIN, ESQ., MICHAEL L. SCHEIER, ESQ., KEATING, MUETHING KLEKAMP, Cincinnati, OH, Of Counsel for Intervenor
OPINION
The Legal Representative of Present and Future Holders of Asbestos-Related Demands (the "Legal Representative"), C. Judson Hamlin, has moved to intervene in the pending avoidance action initiated by plaintiff, the Official Committee of Asbestos Claimants of G-I Holdings, Inc. (the "Committee") against defendant Samuel Heyman ("Heyman") pursuant to Fed.R.Civ.P. 24. For the reasons set forth below, the motion is granted.
The Parties
Heyman is the majority shareholder of G-I Holdings, Inc. ("G-I Holdings"), the successor by merger to GAF Corporation (GAF), a New Jersey company that manufactures roofing and building materials.
The Committee consists of persons who assert tort claims against G-I Holdings by reason of personal injuries or wrongful death caused by exposure to asbestos or asbestos-containing products.
The Legal Representative represents persons who will file asbestos tort claims in the future based on exposure to products for which G-I Holdings bears responsibility.
Facts and Prior Proceedings
On January 1, 1997, Heyman allegedly made a fraudulent stock transfer of GAF's interest in its subsidiary, International Specialty Products ("ISP"), to GAF's shareholders, valued at $998 million for no consideration.
Beginning on January 3, 2000, a series of lawsuits were filed against Heyman alleging a fraudulent attempt to shield the assets of GAF from the claims of asbestos personal injury plaintiffs.
On January 5, 2001, G-I Holdings filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the District of New Jersey. As a debtor in possession, under 11 U.S.C. § 1107(a) G-I Holdings has "all the rights . . . and powers, and shall perform all the functions and duties . . . of a trustee serving in a case under this chapter." The Bankruptcy Court then issued an injunction staying the lawsuits against Heyman under 11 U.S.C. § 524(g) which provides for injunctions in Chapter 11 cases to be implemented in connection with a trust that is to assume the liabilities of a debtor named as a defendant specifically in asbestos claims cases.
On January 22, 2001, the Office of the United States Trustee appointed the Committee pursuant to 11 U.S.C. § 1102(a)(1) which states that, "as soon as practicable after the order for relief under chapter 11 of this title, the United States trustee shall appoint a committee of creditors holding unsecured claims."
On May 14, 2001, the Bankruptcy Court authorized the Committee to bring this avoidance action against Heyman to avoid the transfer of ISP stock pursuant to 11 U.S.C. § 544(b)(1) which provides that "the trustee may avoid any transfer of an interest of the debtor in property or any obligation incurred by the debtor that is voidable under applicable law by a creditor holding an unsecured claim. . . ." See In re Commodore Int'l. Ltd., 262 F.3d 96, 100 (2d Cir. 2001)("[A] creditors' committee may sue on behalf of the debtors, with the approval and supervision of a bankruptcy court . . . where the debtor in possession unreasonably fails to bring suit on its claims").
On September 20, 2001, the avoidance action was commenced in this Court. On October 10, 2001, the Bankruptcy Court appointed the Legal Representative with "standing as a party in interest" under 11 U.S.C. § 1109(b), "to be heard on every matter relevant to the interests of Demand Holders in G-I Holdings's chapter 11 case, including but not limited to, adversary proceedings. . . ." In re G-I Holdings, Inc., 292 B.R. 804, 808 (Bankr. D.N.J. 2003).
On May 13, 2002, the Legal Representative filed a motion with the Bankruptcy Court seeking leave to intervene in this avoidance action as a co-plaintiff with the Committee. The Bankruptcy Court reserved decision, granting the Legal Representative's motion on May 8, 2003, and leaving this Court to decide whether intervention is appropriate under Fed.R.Civ.P. 24.
On June 17, 2003, the Legal Representative filed the motion to intervene with this Court. After submission of briefs and oral argument, the motion was deemed fully submitted on September 3, 2003. Rule 1109(b) Grants the Legal Representative an Unconditional Right to Intervene and Satisfies Rule 24(a)(1)'s Intervention Requirement
Fed.R.Civ.P. 24(a) provides, in relevant part:
Upon timely application anyone shall be permitted to intervene in an action: (1) when a statute of the United States confers an unconditional right to intervene. . . .
The Second Circuit has held in In re The Caldor Corp., 303 F.3d 161 (2d Cir. 2002), that § 1109(b) of the Bankruptcy Code, which provides that "a party in interest may be heard on any issue in a case under this chapter," grants an unconditional right to intervene pursuant to Rule 24(a)(1). The question presented in Caldor was whether the term "case" in § 1109(b) referred only to a case in the bankruptcy court or could also include adversary proceedings relating to such a case. The court held that "case" encompassed all related proceedings as the "`case' triggered by a bankruptcy petition is an `umbrella litigation often covering numerous actions that are related only by the debtor's status as a litigant.'" Id. at 168 (quoting Sonnax Indus. v. Tri Component Prods. Corp. (In re Sonnax Indus.), 907 F.2d 1280, 1283 (2d Cir. 1990)). The court further held that the § 1109(b) phrase, "any issue in a case," "plainly grants a right to raise, appear and be heard on any issue regardless whether it arises in a contested matter or an adversary proceeding." Id. at 169.
Since the Legal Representative has already been deemed a "party in interest" by the Bankruptcy Court, § 1109(b) is satisfied, and through Caldor's holding that § 1109(b) fulfills the requirements of intervention under Rule 24(a)(1), the Legal Representative also satisfies Rule 24(a)(1). Rule 24(a)(1) is dispositive and therefore subsections (a)(2) and (b) need not be addressed.
As Caldor did not use any limiting language in its holding, Heyman's request for a limited role of the Legal Representative is unfounded.
Heyman further contends that the Legal Representative does not satisfy the requirement of 11 U.S.C. § 544(b)(1) that a trustee may only avoid a transfer of the debtor's interest that is voidable by "a creditor" holding an unsecured claim. Heyman argues that since the Legal Representative's claim is on behalf of "a class of unknown `future claim holders' holding `future claims' who are unidentifiable individuals," the Legal Representative has failed to establish the existence of an "actual creditor with a viable cause of action" as required previously by this Court. Official Committee of Asbestos Claimants of G-I Holdings Inc. v. Heyman, 277 B.R. 20, 29 (S.D.N.Y. 2002).
First, § 1109(b) does not require that the intervenor satisfy the requirements which the trustee must satisfy under § 544(b)(1). Second, even under § 544(b)(1), the trustee can exercise the rights of avoidance that "any creditor" could have exercised and need only demonstrate that "an actual unsecured creditor exists." Lippe v. Bairnco Corp., 225 B.R. 846, 852 (S.D.N.Y. 1998). It has already been determined by this Court that the complaint sufficiently alleges the existence of at least two unsecured creditors, the Center for Claims Resolution, Inc., and the EPA, that permits maintenance of this avoidance action. See Official Committee of Asbestos Claimants of G-I Holdings Inc. v. Heyman, 277 B.R. 20, 34 (S.D.N.Y. 2002).
Finally, at least one court in this district has held that some future asbestos claimants in mass tort cases are "actual creditors pursuant to § 544(b)." Lippe, 225 B.R. at 855. Lippe held that asbestos victims who hadn't been aware of injuries in time for the statute of limitations were nonetheless "actual creditors" and were not barred from asserting claims pursuant to § 544(b). The future claimants represented by the Legal Representative are similarly "actual creditors" who are unaware of injury at this time. Rule 24(c)'s Pleading Requirement Can Be Waived
Rule 24(c) provides that "[a] person desiring to intervene shall serve a motion to intervene upon the parties as provided in Rule 5. The motion shall state the grounds therefor and shall be accompanied by a pleading setting forth the claim or defense for which intervention is sought."
Here, the Legal Representative has adopted the claims of the Committee. The Legal Representative "seeks to pursue, in coordination with the Committee, the claims already raised in this action, or any claims that may become apparent through discovery." Legal Rep.'s Mem. at 16. The Legal Representative further emphasizes that the lawsuit would "continue as it has merely with the addition of the Legal Representative as a co-plaintiff," and that he "did not seek to add any causes of action which were factually or legally distinct" from the claims raised by the Committee on behalf of the Estate. Id. at 17. See In re G-I Holdings, Inc., 292 B.R. at 811 ("Here . . . the Legal Representative does not seek to assert an independent right against a . . . claimant.").
It has been held that adopting claims already asserted against a defendant can be sufficient where it does not cause prejudice to the parties. "Although usually, the movant may not merely adopt a pleading of another party, a certain amount of leeway is allowed where such a practice will not prejudice any of the parties." Werbungs und Commerz Union Austalt v. Collectors' Guild, Ltd., 782 F. Supp. 870, 874 (S.D.N.Y. 1991); see Tachiaona v. Mugabe, 186 F. Supp.2d 383, 393 n. 8 (S.D.N.Y. 2002) ("Where . . . the position of the movant is apparent from other filings and where the opposing party will not be prejudiced, Rule 24(c) permits a degree of flexibility with technical requirements.").
The Legal Representative's intervention will not prejudice the Committee. Here, the Committee itself has stated that it "strongly supports the Legal Representative's motion to intervene." Committee's Brief, at 1. See also SEC v. Credit Bancorp, Ltd., No. 99 Civ. 11395, 2000 WL 1170136, at *2 (S.D.N.Y. Aug. 16, 2000) (where an applicant "does not seek to present any causes of action which are factually or legally distinct in a significant way from those already asserted . . . [the] intervention will not unduly inconvenience or delay the [plaintiff] in prosecuting this action.").
The Legal Representative's intervention will not prejudice Heyman. Heyman has been sufficiently apprised of the grounds for the motion and an attachment of an identical copy of the complaint would serve no useful purpose. See McCausland v. Shareholders Mgt. Co., 52 F.R.D. 521 (S.D.N.Y. 1971) ("No doubt exists as to the precise and detailed nature of the intervenors' claim, and defendants have not been prejudiced by the failure to annex to the motion a copy of the complaint already served upon them").
The Second Circuit has held that a statement in appellant's motion papers that they were adopting the original complaint was insufficient because, in the circumstance of a stockholder's derivative action, which must, among other requirements, be verified by oath and must specifically aver that the plaintiff was a shareholder at the time of the transactions complained of, the lack of a pleading was "not merely a technical lack of compliance with the rules." Abramson v. Pennwood Inv. Corp., 392 F.2d 759, 761 (2d Cir. 1968). In the instant case, the absence of a pleading is a technical lack of compliance.
Finally, Heyman attempts to find incompatibility between the Legal Representative's adoption of the Committee's claims, which allows waiver of the pleading requirement, and the issue of inadequate representation of the future claimants by the Committee. Not only are these facts compatible in cases involving future claimants because the claims are identical but "appointment of the Legal Representative . . . [is] essential" to assuring the interest of future claimants (In re G-I Holdings, Inc., 292 B.R. at 814). Further, inadequacy of representation is only a factor under Rule 24(a)(2), and need not be reached as the Legal Representative has an unconditional right to intervene under Rule 24(a)(1).
Conclusion
On the basis of the foregoing, the Legal Representative's Motion to Intervene in the avoidance action against Heyman is granted.
It is so ordered.