2009 D e c i sion s O p inion s of the U nit e d S t at e s C our t of Appe al s for the Thir d C ir c uit 3-3-2009 

# In Re: C one Mi ll s C o P r e c e de nt i al or N on-P r e c e de nt i al : N on-P r e c e de nt i al D ocke t N o . 08-1755

F o llow thi s and a dd it ion al work s at : http://d i git alc ommon s .l a w . vi ll anova . e du/thir dc ir c uit_2009

Thi s de c i sion i s br ou ght t o you for f r e e and ope n a c c e s s b y the O p inion s of the U nit e d S t at e s C our t of Appe al s for the Thir d C ir c uit at V i ll anova U nive r sity S choo l of L a

w Di git al Reposit ory

. It h as be e n a c c ept e d for inclusion in 2009 D e c i sion s b y an author i z e d a dmini s tr at or of V i ll anova U nive r sity S choo l of L a

w Di git al Reposit ory

. F or mor e inform at ion, p le as e c ont a ct Be n j amin . C arl s on@l a

w . vi ll anova . e du . Re c omme nde d C it at ion " In Re: C one Mi ll s C o " (2009). 2009 D e cisio n s . P ape r 1786. http://d i git alc ommon s .l a

w . vi ll anova . e du/thir dc ir c uit_2009/1786H on. L oui s H . Pol l ak, Seni or J udge, U ni t ed St at es D i s t r i ct * C our tfort he East ern D i s t ri ctof Penns y l vani a, s i t t i ng by des i gnat i on. NO T PRECEDEN TI AL U N IT E D S T A T E S C O U R T O F A P P E A L S F O R T H E T H IR D C IR C U IT N o. 08- 1755

_______ IN R E : C O N E M IL L S C O R P O R A T IO N , et a l, D ebtor s C R O M P T O N C O L O R S IN C .; C R O M P T O N C O R P O R A T IO N ,

A p p e llan ts O n A p p ea l from the U n it ed S tat es D istri ct C o u rt

fort he D i s t r i ctof D el aw ar e ( D . C . N o. 1- 05- cv- 00232 ) D istric t Ju d g e : H o n o ra b le G re g o ryM . S lee t

A r gued J anuary12, 2009 B efore: S L O V ITE R and B A R R Y , C i rcui tJudg es,

and PO L L A K , D i s t r i ctJ udge * ( Fi l ed : M ar ch 03, 2009 )

_____ J ohn M . A r m s t r ong, E s q. S c h n a d e r H a rriso n S e g a l & L e w is 22 0 L ake D ri ve E ast W o o d land F all s C o rpo rate P ark C herr yH i l l , N . J . 08002 G er ar d S. C at al anel l o , E s q. ( A r gued) W ol fB l ock 250 Par k A venue N ew Y or k, N . Y . 10177On J u l y 1 , 2 0 0 5 , Cr o mp t o n Co rp o r a t i o n c h a n g e d i t s n a me 1 to C h e m tu ra C o rp o ra tio n . 2 V i r gi ni a L. H ogben, E s q. W ol fB l ock 1 6 5 0 A rc h S tre e t 2 2 F loo r nd Phi l adel phi a, PA l 9l 03 A tto rn e y s f

o r A p p e llan ts M i chae l R . L as t ow s ki , E s q. ( A r gued) D u a n e M o rris 1 1 0 0 N o rth M a rk e t S tre e t Sui t e 1200 W i l m i ngt on, D E 19801 A t t or neyforA ppel l ee

_____ OP I NI ON SL O V I T E R , C i r cui tJ udge. C r om pt on C ol or s C orpor at i on ( now know n as “C hemt ur a”) , appea l s the D i s t r i ct 1 C our t ’ s or deraff

i r m i ng t he B ankrupt cyC our t ’ s rul i ng thatC hemt ur a i s bound bythe o rd e r a u th o riz in g th e sa le ( “ S a le O rd e r” ) o f su b sta n tiallya ll o f

th e a ss e ts o f

C o n e M ill s C orpor at i on ( “C one M i l l s ”) , a cha pt er11 debt ori n bankrupt cypr ocee di ngs , t o t he pr edec es s or s of I nt ernat i onal T ext i l e G r oup ( “I T G ”) . C one M i l l s had oper at ed a dy e and chemi cal m anufa ctur i ng fac i l i t yatt he pr oper t ythati ts ol d m or e than thi r t yy ear s ago t o a pr edec es s orof C hemtur a. C hemt ur a cl ai m s thati thad know n envi r onm ent al l i t i gat i on3

cl ai m s agai ns tC one M i l l s befor e the bankrupt cypr ocee di ngs and thati t s cl ai m s w er e not e x tin g u ish e d b yth e sa le b e c a u se C o n e M ill s a lleg e d lyf a iled to p ro v id e C h e m tu ra w ith cons t i tut i onal l yadequa t e not i ce. O n t hi s bas i s , C hemt ur a s oughtt o br i ng s ucce s s or l i abil i t ycl ai m s agai nstITG , w hich succeede d the com pan i es that purchased C on e M i l l s’ a s s e ts . IT G m o v e d th e B a n k ru p tc yC o u rt to e n f o rc e th e S a le O rd e r a g a in s t C h e m tu ra . T he B ankrupt cyC our tgr ant ed I T G ’ s m ot i on, rul i ng thatC hemt ur a r ece i ved pr opernot i ce of the sal e and t hat the b ank rupt cysal e barr ed fu ture successorl i abil i t ycl ai m s agai nst IT G . I. T h e p a rties a re f

a m ili a r w ith th e f

a c tu a l an d p ro c e d u ra l b a c k g ro u n d a n d w e w ill n o t r e p e a t th e m h e re , e x c e p t f o r t h e b ri e f

f a c tu a l s ta te m e n t u n d e rl y in g th is o p in io n . O n Sept ember24, 2003, C one M i l l s fi l ed a vol unt arypet i t i on forbankrupt cyunder chapt er11 of the B ankrupt cyC ode i n t he U ni t ed St at es B ankrupt cyC our tforthe D i s tr i ct of D el aw ar e. T her eaf

t er , C one M i l l s fi l ed a mot i on foran or der“author i zi ng the s al e of s ubs t ant i al l yal l of [i t s ] as s et s . . . fr ee a nd cl earof l i ens , cl ai m s , encumbr ance s , and in te re s ts .” S u p p . A p p . a t 1 4 5 3 . O n N ovember7, 2003, t he B ankrupt cyC our tappr oved C one M i l l s ’ m ot i on, and sc h e d u led a sa le h e a rin g f o r F e b ru a ry9 , 2 0 0 4 . T h e B a n k ru p tcy C o u rt o rd e re d C o n e M ill s t o s erve not i ce of

t he s al e hea r i ng on cert ai n par t i es , i ncl udi ng “al l per s ons w i t h pot ent i al cl ai m s agai ns tt he D ebt orof atl eas t$ 100, 000 ( bas ed on fi l ed pr oofs of cl ai m or[C oneT he Sal e O r derdefi nes “I nt er es t s ” verybr oadl y t o i ncl ude 2 “l i abi l i t i es , demands . . . [and] cl ai m s . . . ar i s i ng underdoctr i nes of s u c c e s s o r l ia b ility.” S u p p . A p p . a t 1 5 4 4 . 4 M il ls’ ] sch ed u les o r bo o k s an d rec o rds).” S u p p . A p p . at 14 2 8 . T h e B an k rup tcyC o u rt al so ordered ser vice of t he n oti ce of the sal e heari ng on “part i es t o all un exp i red l eases, l i cens e agr eement s and exe cut or ycontr act s ” ( “C ur e A m ountN ot i ce” ) s o t hats uch part i es coul d m ake obj ect i ons t o “cur e” a nyaddi t i onal amount s due ori n defa ul t . Supp. A pp. at 1422. T he B ankrupt cyC our tal s o r equi r ed not i ce bypubl i cat i on. T he B ankrupt cyJ udge appr oved C one M i l l s ’ pr opos ed form of not i ce f oreac h s etof part i es and att ache d t he f o rm s o f n o tic e s a s e x h ib its to th e o rd e r. A ft ert he s al e hea r i ng on February9, 2004, “atw hi ch t i m e al l i nt er es t ed part i es w er e off er ed an opportuni t yt o be hea r d w i t h r es pectt o” the pr opos ed s al e, Supp. A pp. at 1540, t he B ankrupt cyC our ti s s ued the or derauthor i zi ng the s al e of s ubs t ant i al l yal l of C one M i l l s ’ as s et s t o I T G ’ s pr edec es s or s ( her eaf t er“B uy er s ”) . T he Sal e O r derpr ovi ded t hat the B uy ers w ou l d acq uir e t he asset s “fr ee and cl ear of l i ens, cl ai m s, encu m brances, and i nt er es t s . ” Supp. A pp. at1539. T he Sal e O r deral s o i ncorpor at ed a f i ndi ng of fa ct t hatt he B uy er s w oul d nothave a gr eed t o t he A s s etPur chas e A gr eement( “A PA ”) i f the s a l e “ wa s n o tf

r e e a n d c l e a ro f

a l l I n t e r e s t s o f

a n yk i n d o rn a tu r e wh a t s o e v e r , o ri f [ I T G] w o u ld , o r i n th e f

u tu re c o u ld , b e lia b le f

o r a n yo f th e In te re s ts .” S u p p . A p p . a t 1 5 4 4 . 2 T h e o rd e r f

u rth e r p ro v id e d th a t th o se in ter e st-h o ld e rs w h o h a d n o t o b jec ted to th e sa le w e re d e e m e d to h a v e c o n se n ted to th e sa le, a n d th a t th e B u y e rs a re n o t th e su c c e ss o r to5

C one M i l l s “byr eas on of anyt heoryof l aw orequi t y ” and s hal l notbe r es pons i bl e forany of i t s l i abi l i t i es orobl i gat i ons , i ncl udi ng envi r onm ent al cl ai m s . Supp. A pp. at1545. I n A ugus t2004, t he N ew J er s eyD epart m entof Envi r onm ent al Pr ot ect i on (“ N JD E P ” ) b ro u g h t en v iro n m e n tal re m e d iatio n c laim s a g a in st C h e m tu ra a n d IT G in sta te c o u rt , a n d C h e m tu ra c ro s s -c la im e d a g a in s t I T G f o r c o n tr ib u tio n a n d u n

ju s t e n ri c h m e n t. O n D e c e m b e r 1 3 , 2 0 0 4 , C h e m tu ra f iled a p ro o f

o f c laim , as se rtin g w h a t ar e e ss e n tially su c c e ss o r liab ili tyc laim s a g a in st IT G . IT G f iled a m o tio n w ith th e B a n k ru p tcy C o u rt to dir ectt he N JD E P and C hem tura t o co m plyw i t h the Sale O rder , argui ng that these s ucce s s orl i abi l i t ycl ai m s vi ol at ed the t erm s of thator der . C hemt ur a r es ponded thatt he s al e s houl d notbe enf

or ced a gai ns ti tbeca us e C one M i l l s fai l ed t o pr ovi de i tw i t h not i ce t hati t s “envi r onm ent al / s ucce s s orl i abi l i t ycl ai m s . . . w oul d be el i m i nat ed bec aus e of the a s s e t s a le .” A p p . a t 1 0 1 3 . C hemt ur a al l eges t hati tw as nots erved w i t h t he “a uct i on and s al e not i ce, ” ort he m anyot herform s of not i ce i tcl ai m s i ts houl d have r ece i ved, and al l eges thati tw as “l eft off of al l s ervi ce l i s t s r el at ed t o t he not i ce of s al e, the mot i on t o appr ove the s al e, the p ro p o se d o rd e r a n d th e S a le A g re e m e n t.” A p p e llan t’s B r. at 1 4 -1 5 . It co n c e d e s th a t it r ece i ved the C ur e A m ountN ot i ce on N ovember25, 2003, butcont ends thatbeca us e that n o tice w a s n o t ad d re ss e d to a p a rticu lar p e rso n in th e c o rp o ra tio n , the n o tice w a s s e n t to the c red itd ep artm en t w h ich h ad n o inf o rm ati o n o n C o n e M il ls an d p lace d the C u re A m ountN ot i ce i n an “i nact i ve, ‘ dead’ fi l e. ” A pp. at1026. A s a r es ul t , the documentw asT he D ist ri ct C our thad j ur i s di ct i on t o r evi ew the 3 B an k rup tcy C o u rto rde r un d er 2 8 U . S . C . § 1 5 8 (a), an d this co u rt has j ur i s di ct i on under28 U . S. C . § 158( d) . “I n r evi ew i ng the b an k rup tcyco u rt ’s de term ination s, w e ex erc ise the s am e stan d ard o f revi ew as t he di s t r i ctcour t , thati s , w e r evi ew the bankrupt cy cour t ’ s l egal det erm i nat i ons de novo, i t s fac tual fi ndi ngs forcl ear e r r o ra n d i t s e x e r c i s e o f d i s c r e t i o n f

o ra b u s e t h e r e o f. ” I nt er fac e G r oup- N evada , I nc. v. T r ans W or l d A ir l i nes , I nc. ( I n r e Tra ns W or l d A i r l i nes , Inc . ), 145 F. 3d 124, 131 ( 3d C i r . 1998) ( i nt ernal q u o tat ion s an d cit ati o n s o m itted).

. 6 not“di s cover ed” unt i l February16, 2005, s hor t l ybefor e a he ar i ng on February28, 2005, b e f o re th e B a n k ru p tc yC o u rt o n IT G ’s m o tio n to e n f o rc e th e s a le . Fol l ow i ng an evi dent i aryhear i ng, the B ankrupt cyC our tdel i ver ed an or al rul i ng fi ndi ng forI T G , hol di ng t hatt he not i ce w as pr ovi ded i n acc or dance w i t h R ul e 2002 of the F ed era l R u les o f B an k rup tcyP roc ed u re (“B an k rup tcyR u les”) an d that, b ec au se C h em tura al s o had ac tual not i ce, i tw as “pr ecl uded fr om now at t acki ng the s al e or der . ” A pp. at 1334. C hemt ur a appe al ed thi s deci s i on t o t he D i s t r i ctC our t , w hi ch af fi r m ed the B a n k ru p tcy C o u rt. C h e m tu ra tim e lyf iled th is a p p e a l. 3 II. C h e m tu ra w a s a g e n e ra l u n se c u re d c re d ito r o f C o n e M ill s. T h e D istric t C o u rt h e ld t hatas a mat t erof l aw i tw as notent i t l ed t o t he s ame not i ce of an as s ets al e author i zed under11 U . S. C . § 363( f) as t hatw hi ch mustbe gi ven t o l i enhol der s underB ankrupt cy R ul es 6004( c) , 9014 and 7004. I n r evi ew i ng ( and af fi r m i ng) the or derof the B ankrupt cy7

C o u rt, th e D istric t C o u rt sta ted th a t itw a s “ u n d isp u ted th a t n o tice o f th e sa le w a s s e n t to C hemt ur a att he addr es s : C r om pt on C orpor at i on, B ens on R oad, M i ddl ebury , C T 06749” and i tw as t hen pl ace d i n a “‘ dead’ fi l e. ” A pp. at6. T he C our tagr eed w i t h t he B ankrupt cyC our t ’ s concl us i on t hatR ul e 6004( a) and R ul e 2002( a) ( 2) contr ol l ed the not i ce of s ervi ce a s pectof thi s cas e. T he D i s t r i ctC our ts t at ed that“R ul e 6004 governs th e u se , sa le, o r le a se o f p ro p e rty ,” a n d th a t su b d iv isio n (a ) o f th a t ru le “ sp e c if

ica lly addr es s es not i ce r equi r ement s ” and onl yr equi r es thatnot i ce of a pr opos ed “f

r ee a nd c le a r” s a le o f

a s s e ts b e “ g iv e n p u rs u a n t to R u le 2 0 0 2 (a )( 2 ).” A p p . a t 7 -8 . U n d er R u le 20 0 2 , n o ti ce o f a sale o rde r t o b e g iven to g en era l un sec u red cre d it o rs ( s uch as C hemt ur a) t hathave notdes i gnat ed an a l t ernat e addr es s i s t o be di r ect ed t o t he cr edi t or ’ s addr es s t hati s found i n t he debt or ’ s r ecor ds . T he not i ce t o C hemt ur a w as s ent t o i t s bus i nes s addr es s i n M i ddl ebury , C onnect i cut . Fol l ow i ng a l engthyhear i ng, the B a n k ru p tcy C o u rt c o n c lu d e d th a t C h e m tu ra re c e iv e d th e n o tice re q u ire d u n d e r R u le 2002( a) and thati thad ac tual not i ce of the s al e. C hemt ur a ar gues t hatpur s uantt o R ul e 6004( c) the not i ce s houl d have be en d ire c ted to o n e o f

its o f f ice rs o r o th e r a u th o riz e d a g e n ts. T h e B a n k ru p tcy C o u rt, i n r eas oni ng t hatt he D i s t r i ctC our tappr oved, r ej ect ed C hemt ur a’ s ar gum ent , not i ng that C hemt ur a’ s i nt erpr et at i on “w oul d el i m i nat e R ul e 2002( a) ( 2) and 6004( a) . ” A pp. at1333. W e ar e per s uaded byt he D i s t r i ctC our t ’ s concl us i on. I n s hor t , C hemt ur a w as not ent i t l ed t o anyhei ght ened f or m of not i ce. T he s al e not i ce thatC hemt ur a r ece i vedr efe r r ed t o t he mot i on t o appr ove the s al e, des cr i bed the as s et s t o be s ol d, s t at ed the

m anneri n w hi ch the A PA coul d be obt ai ned, s t at ed the dat e and t i m e of the s al e hea r i ng a n d th e d e a d lin e to o b

je c t to th e s a le . T h u s C h e m tu ra re c e iv e d a ll th e n o tic e th a t w a s d u e . T h e f a ilu re o f its c re d it d e p a rtm e n t to f o rw a rd th e n o tice to th e leg a l d e p a rtm e n t w a s its r es pons i bi l i t y . T he D i s t r i ctC our tal s o agr eed w i t h t he B ankrupt cyC our t ’ s concl us i on th a t C h e m tu ra is b o u n d b yth e S a le O rd e r b e c a u s e it h a d a c tu a l n o tic e o f th e s a le . C hemt ur a does notdenyt hati tr ece i ved s uch ac tual not i ce. A s a r es ul t , C hemt ur a has no bas i s t o as s erti t s cl ai m s agai ns tI T G w hi ch ac qui r ed C one M i l l s ’ as s et s fr ee a nd cl ear . O f cour s e, C hemt ur a r et ai ns i t s cl ai m agai ns tC one M i l l s as an uns ecur ed cr edi t or . Fort he r eas ons s etfor t h, w e w i l l aff i r m the D i s t r i ct C o u rt ’s ord er.

8