Claims Against Manville Insurer Permitted to Proceed For Violation of Due Process U.S.District Court for the Southern District of New York, July 27, 2018
NEW YORK — The plaintiff, Salvador Parra, developed asbestosis after working as an insulator in the 1960s and 1970s. He filed suit in 2009 in Mississippi against numerous Manville-related entities, including Marsh USA, Inc., a Manville insurer. In 1986, Marsh contributed $29.75M to the Manville Trust in exchange for a release of all claims “arising out of or relating to services” performed by Marsh for Manville or “in connection with insurance policies issued to” Manville, and an injunction funneling all future such claims into the Manville Trust. That agreement was confirmed by a 1986 order.
In his lawsuit, Parra alleged that Marsh conspired with asbestos producers, distributors and insurers to withhold information from the public regarding the dangers of asbestos inhalation. Marsh filed a motion in bankruptcy court to enforce the 1986 order between Manville and its insurers, which created the Manville Trust. In July 2015, the bankruptcy court held that Parra was required to bring his claims against the Manville Trust because his claims against Marsh were barred by the terms of the 1986 order and his due process rights were not violated. The ruling was appealed and remanded, and in January 2018, the bankruptcy court again ruled that Parra could only seek recovery from the Manville Trust since he was adequately represented by the Trust’s Future Claimant Representative (FCR). Parra again appealed.
After analyzing the record, the district court found that that neither the FCR nor any other party to the 1986 proceedings believed the bankruptcy court had jurisdiction to enjoin independent claims against third-parties. Therefore, the FCR could not have provided adequate representation on that issue. Accordingly, Parra’s due process rights were violated. The court further found that the inadequate representation was not harmless, and therefore allowed Parra to proceed with the claims against Marsh in Mississippi.