Post-Bankruptcy Petition Malignancy Claim Not “Sufficiently Rooted” in Pre-Bankruptcy Past to Constitute Property of the Estate

In a follow-up to cases previously reported on in ACT, the plaintiffs in this case, Administrators of the Estate of Bjorn Dahl, alleged that the decedent, Mr. Dahl, was exposed to asbestos while working aboard various ships. The plaintiffs assert that the decedent developed two asbestos-related illnesses, a non-malignancy injury dating back to 1995 and a malignancy claim arising in 1997, as a result of his exposure to asbestos aboard those ships. In 1995, Mr. Dahl brought claims for non-malignant asbestos-related disease. Mr. Dahl’s asbestos claim was dismissed administratively, leaving open the possibility for the action to be pursued at a later, unspecified date. Approximately one year after Mr. Dahl filed his first asbestos action and approximately one month after it was dismissed, Mr. Dahl filed for bankruptcy pursuant to Chapter 7 of the bankruptcy code, without listing his asbestos claims as an asset in the bankruptcy filing. The bankruptcy case was closed four months later. Thereafter, in September of 1997, Mr. Dahl was diagnosed with asbestos-related cancer, giving rise to a claim for a malignant asbestos-related disease. On February 7, 2011, approximately fifteen years after he was discharged from bankruptcy, and approximately sixteen years after Mr. Dahl first filed his asbestos action, the MDL Court reinstated Mr. Dahl’s asbestos action, which had been dismissed by Judge Weiner in 1996.

The defendants moved for summary judgment, seeking dismissal of Mr. Dahl’s non-malignancy and malignancy claims on following grounds:  (1) The plaintiffs’ non-malignancy claims are barred by way of judicial estoppel because Mr. Dahl failed to disclose the asbestos action as an asset in his bankruptcy filing, and (2) The plaintiffs cannot pursue any of the asbestos claims in the asbestos action, neither the initial non-malignancy claims nor his post-petition malignancy claims because the entire asbestos action is now owned by the bankruptcy estate.  In terms of the non-malignancy claims, the court denied the defendants’ motion on judicial estoppel grounds because there was no evidence that the Mr. Dahl changed his position “in bad faith” as required to meet the defendants’ burden on the motion because a layman could not foresee that a court would reopen an asbestos case fifteen years after the bankruptcy filing.  The court determined, however, that the non-malignancy claims were an asset of the bankruptcy estate and that only the Trustee could pursue that portion of the claim.

The court reached a different result on the defendants’ standing argument for the malignancy claim, finding that “none of the cases relied upon by Defendants support the conclusion that Mr. Dahl’s malignancy asbestos claims are property of the bankruptcy estate…given the facts of the present case, and the standard set forth by maritime law for determining accrual of an asbestos cause of action (including, specifically, its utilization of the “discovery rule”), Mr. Dahl’s malignancy asbestos claims are not ‘sufficiently rooted’ in his pre-bankruptcy past to constitute property of the bankruptcy estate…Mr. Dahl’s malignancy asbestos claims (which did not accrue until after the bankruptcy petition was filed and after Mr. Dahl was discharged from bankruptcy) are, therefore, not property of the bankruptcy trustee (and not subject to pursuit by creditors in the bankruptcy action).”

Read the full decision here.