The plaintiff, Salvador J. Parra, Jr., developed asbestosis after working as an insulator and sued Marsh USA, Inc., an insurance broker, and others. Marsh filed a motion in the bankruptcy cases of Johns-Manville, arguing it was relieved of liability for the plaintiff’s claims. The bankruptcy court granted the motion, and the plaintiff appealed. The district court affirmed in part, reversed in part, and remanded the case to the bankruptcy court for further proceedings.
Marsh was Manville’s primary insurance broker from 1944-1982. Manville had sued Marsh, alleging it failed to procure sufficient insurance coverage. In 1986, Marsh settled with Manville, and the bankruptcy court approved Manville’s plan of reorganization. The insurance settlement order included a settlement fund, with a payment by Marsh that released all Marsh claims, even if they were not known, and an injunction against future Marsh claims. In this case, Marsh argued that Plaintiff’s claims fell within this settlement order. The plaintiff filed a response, arguing various points.
The court started its analysis by stating that parties which do not receive adequate notice of a bankruptcy case cannot be bound by orders issued in that case. Special notice problems arose in asbestos cases due to the latency of the injury.
Although the plaintiff argued the bankruptcy court could not hold his claims were barred without holding an evidentiary hearing, there was no merit to the plaintiff’s claims that Marsh was required to prove his claims were “inextricably intertwined” with Marsh’s insurance relationship with Manville in order to establish that his claims fell within the scope of the settlement order. However, the court remanded the case to determine whether the plaintiff received sufficient due process in connection with entry of the 1986 orders. “While Parra cannot challenge the 1986 Orders on the basis of subject matter jurisdiction, there is no question that the bankruptcy court exceeded its subject matter jurisdiction in barring Parra’s claims against Marsh. According to the Second Circuit opinion in Manville III, ‘a bankruptcy court only has jurisdiction to enjoin third-party non-debtor claims that directly affect the res of the bankruptcy estate.’ However, Parra’s claims do not seek to collect from the assets of the estate — i.e., the insurance policy proceeds — but seek to hold Marsh liable for its independent wrongdoing, not Manville’s. As such, Parra’s claims do not seek to collect from the res of the Manville chapter 11 estate, but are in personam claims for liability against Marsh.”