Use of Future Claims Representative Satisfied Due Process

United States Court of Appeals, Second Circuit, February 19, 2020

The Johns-Manville Corporation entered bankruptcy in the early 1980s. In 1986, the bankruptcy court established a fund pursuant to a settlement with Johns-Manville’s insurers to compensate individuals injured by the corporation’s asbestos-containing products. The court then ordered that all claims—both those against Johns-Manville based on their products and those against its insurers related to their coverage for such claims—be brought against the trust that would administrate the fund. That trust still exists and processes claims from people who were injured by Johns-Manville’s products but whose injuries had not manifested by the time of the bankruptcy proceedings in the 1980s.

Salvador Parra, Jr. brought a lawsuit against an insurer based on its handling of a related claim in state court, but the insurer successfully argued that Parra’s claim had to be brought against the trust. Appeals followed.

The court ruled for the insurer based on two issues. First, when the 1986 order creating the fund was being argued in bankruptcy court, future claimants (such as Parra) were represented by a designated future claims representative, who argued vigorously for such claimants’ interests. Second, extensive efforts were made at the time to notify potential claimants of the proceedings. As a result, the due process rights of future claimants were not violated, and Parra’s claims were governed by the 1986 order. His state court claim against the insurer therefore failed.