Source: https://law.justia.com/cases/federal/appellate-courts/F2/710/1194/40962/
Timestamp: 2020-03-31 00:08:25
Document Index: 395157614

Matched Legal Cases: ['§ 1101', '§ 362', '§ 362', '§ 1292', '§ 362', '§ 547', '§ 1301', '§ 362']

United States Court of Appeals,sixth Circuit, 710 F.2d 1194 (6th Cir. 1983) :: Justia
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United States Court of Appeals,sixth Circuit, 710 F.2d 1194 (6th Cir. 1983)
US Court of Appeals for the Sixth Circuit - 710 F.2d 1194 (6th Cir. 1983) Argued May 24, 1983. Decided July 1, 1983
These consolidated appeals join inquiry into the legal impact upon pending asbestos actions of petitions for reorganization which have been filed pursuant to Chapter 11 of the Bankruptcy Code, 11 U.S.C. § 1101 et seq. (Code), by Unarco Industries, Inc. (Unarco)1 and Johns-Manville Sales Corporation (J-M),2 both of which are defendants in thousands of asbestos cases pending in the state and federal forums throughout the nation. As Chapter 11 petitioners, all proceedings against Unarco and J-M were automatically stayed by the mandate imposed by 11 U.S.C. § 362. The bankruptcy court presiding over J-M's petition has refused to broaden the automatic stay of proceedings afforded the debtor under Sec. 362 to the co-defendants of J-M in asbestos actions pending throughout the country. It has also refused to permit the suits against J-M to proceed to judgment. See: In re Johns-Manville Corporation, et al., 26 B.R. 420, adversary proceeding No. 82-6221A, Decision No. 1 (Bkrtcy.S.D.N.Y. 1983). Similarly, the bankruptcy court presiding over Unarco's petition has refused to lift the stay against Unarco. See: In re UNR Industries, Inc., 23 B.R. 144 (Bkrtcy.N.D. Ill. 1982). The removal of Unarco and J-M as defendants in thousands of pending asbestos actions has generated concern by co-defendants who characterize themselves as "minor" defendants.
The two Chapter 11 debtors, Unarco and J-M, were party defendants in Lynch v. Johns-Manville Sales Corporation, et al., 23 B.R. 750, pending before Judge Spiegel, United States District Court for the Southern District of Ohio. Two solvent defendants in Lynch, Raymark Industries and Keene Corporation, moved the court for a stay of the proceedings pending against them under 11 U.S.C. § 362, Rule 19, Fed. R. Civ. P., and the court's inherent powers. The motions were denied by memorandum opinion and order dated October 5, 1982. The order was subsequently adopted by reference in denial of similar motions by other solvent co-defendants of Unarco and/or J-M in other asbestos actions pending before Judge Spiegel. Bender v. Johns-Manville Sales Corp., et al., No. C-1-81-900; Burke v. Johns-Manville Sales Corp., et al., No. C-1-81-289; Carle v. Johns-Manville Sales Corp., et al., No. C-1-82-214; Chaddock v. Johns-Manville Sales Corp., et al., No. C-1-82-501; Goad v. Johns-Manville Sales Corp., et al., No. C-1-82-127; Phillips v. Johns-Manville Sales Corp., et al., No. C-1-82-299; and Milford v. Dana Corp., No. C-1-82-362. The foregoing orders denying motions to stay these asbestos proceedings were certified by the district court for immediate appeal pursuant to 28 U.S.C. § 1292(b) and this Court granted applications for permission to appeal. Lincoln Lynch, et al. v. Johns-Manville Sales Corp., et al., 701 F.2d 42 (6th Cir. 1983).
Confronting the initial inquiry of whether the automatic stay provision, 11 U.S.C. § 362(a), may be invoked by the solvent co-defendants of Unarco and J-M to stay proceedings against them, it is noted that said provision facially stays proceedings "against the debtor" and fails to intimate, even tangentially, that the stay could be interpreted as including any defendant other than the debtor:
It is universally acknowledged that an automatic stay of proceeding accorded by Sec. 362 may not be invoked by entities such as sureties, guarantors, co-obligors, or others with a similar legal or factual nexus to the Chapter 11 debtor. See: In re Fintel, 10 B.R. 50 (Bkrtcy.Or.1981) (surety); Matter of Earth Lite, Inc., 9 B.R. 440 (Bkrtcy.Fla.1981) (guarantor); In re The Van Shop, Inc., 8 B.R. 73 (Bkrtcy.N.D. Ohio 1980) (co-obligor); In re Aboussie Brothers Construction Co., 8 B.R. 302 (E.D. Mo. 1981) (individual partners of bankrupt partnership); GMAC v. Yates Motor Co., 159 Ga.App. 215, 283 S.E.2d 74 (1981) (joint tortfeasors); In re Smith, 14 B.R. 956 (Bkrtcy.D.C.Conn.1981) (guarantor on student loan); In re The Bank Center, Ltd., 15 B.R. 64 (Bkrtcy.W.D. Pa. 1981) (partners of bankrupt partnership); In re Larmar Estates, Inc., 5 B.R. 328 (Bkrtcy.E.D.N.Y. 1980) (guarantors of loan); In re Cloud Nine, 3 B.R. 202 (Bkrtcy.D.N.Mex.1980) (co-debtors); In re Trammel Road Townshouses, Ltd., 5 B.C.C. 314 (N.D. Ga. 1977); Globe Construction Co. v. Oklahoma City Housing, 571 F.2d 1140 (10th Cir. 1978). Contra: In re White Motor Credit Corp., 11 B.R. 294 (Bkrtcy.N.D. Ohio 1981) (dictum), rev. on other grounds, 23 B.R. 276 (N.D. Ohio 1982).
H.R.Rep. No. 95-595, 95th Cong., 2d Sess. 340 (1978), reprinted at U.S.Code Cong. & Admin.News, 1978, p. 6297. Nothing in the legislative history counsels that the automatic stay should be invoked in a manner which would advance the interests of some third party, such as the debtor's co-defendants, rather than the debtor or its creditors. This Court concurs with the district court's conclusion that "it would distort congressional purpose to hold that a third party solvent co-defendant should be shielded against his creditors by a device intended for the protection of the insolvent debtor" and creditors thereof. See also: In re Related Asbestos Cases, 23 B.R. 523, 527 (N.D. Cal. 1982); In re UNR Industries, Inc., 23 B.R. 144 (Bkrtcy.N.D. Ill. 1982); Ashworth v. Johns-Manville, et al., Nos. C78-470, C81-1545, C77-4088, C79-167 (N.D. Ohio Mar. 21, 1983) at 4.
It is a fundamental rule of statutory construction that inclusion in one part of a congressional scheme of that which is excluded in another part reflects a congressional intent that the exclusion was not inadvertent. See: Equal Employment Opportunity Commission v. Kimberly Clark Corp., 511 F.2d 1352, 1362 (6th Cir.), cert. denied, 423 U.S. 994, 96 S. Ct. 420, 46 L. Ed. 2d 368 (1975). In particular, this Court has acknowledged the Bankruptcy Act as a detailed and calculated statutory scheme particularly appropriate to in pari materia construction. See: In re Bell, 700 F.2d 1053 (6th Cir. 1983) (construing Chapters 7 and 13 in pari materia); In re Fulghum Construction Corporation, 706 F.2d 171 (6th Cir. 1983) (construing subsections of 11 U.S.C. § 547 in pari materia). In the action sub judice, such a construction of Chapters 11 and 13 of the Code support the proposition that Congress did not envision or intend the automatic stay of proceedings to be available to solvent co-defendants of a Chapter 11 debtor. Particularly, Chapter 13 expressly stays proceedings of creditors against co-debtors of the petitioner, 11 U.S.C. § 1301(a), whereas similar language is significantly absent from Chapter 11. Not only is the absence of any expansion of the scope the stay in Chapter 11 probative of congressional intent but, further, the pronouncement which does appear in Chapter 13 is extremely limited; it applies only to co-debtors rather than, as in the action at bar, co-defendants of the petitioner. Accordingly, in pari materia construction of Chapters 11 and 13 counsel that Congress did not envision or intend the Sec. 362 stay to be utilized in a manner other than for the purpose of protecting the debtor and its estate. See also: In re Related Asbestos Cases, supra, 23 B.R. at 528; Pitts v. Unarco Industries, Inc., 698 F.2d 313 (7th Cir. 1983); In re Massachusetts Asbestos Cases, M.B.L. Nos. 1 & 2 (D. Mass. Sept. 23, 1982); In re Stay of Proceedings Against Defendants Johns-Manville Corporation and Unarco Industries, Inc., 99 Wash. 2d 193, 660 P.2d 271 (S.C.Wash.1983) (en banc); Clutter v. Johns-Manville, et al., No. C-78-1229 (N.D. Ohio Aug. 2, 1982); In re UNR Industries, Inc., supra.
The solvent co-defendants of Unarco and J-M also urge a judicial classification of the Chapter 11 debtors as "indispensible" so as to mandate a stay of proceedings under Rule 19, Fed. R. Civ. P. 4 Although the actions consolidated on appeal are uniformly predicated upon diversity, the issue of joinder and indispensability is one of federal law. Provident Tradesmans Bank & Trust Co. v. Patterson, 390 U.S. 102, 125, note 22, 88 S. Ct. 733, 746, note 22, 19 L. Ed. 2d 936 (1968). It is beyond peradventure that joint tortfeasors are not indispensable parties in the federal forum. See: Field v. Volkswagenwerk-AG, 626 F.2d 293, 298 n. 7 (3d Cir. 1980); Herpich v. Wallace, 430 F.2d 792, 817 (5th Cir. 1970); Windert Watch Co., Inc. v. Remex Electronics, Ltd., 468 F. Supp. 1242, 1246 (S.D.N.Y. 1979); 7 Wright & Miller, Federal Practice and Procedure, Sec. 1623 at 241-42 (1973 & Supp.1981); Royal Truck and Trailer v. Armadora Maritime Salvadorena, 10 B.R. 488 (N.D. Ill. 1981); Jett v. Phillips & Associates, 439 F.2d 987 (10th Cir. 1971); Sandobal v. Armour & Co., 429 F.2d 249 (8th Cir. 1970); 3A Moore, Federal Practice p 19.07(1) (2d ed. 1967). Indeed, the Advisory Committee Notes accompanying Rule 19 provide that "a tortfeasor with the usual 'joint and several' liability is merely a permissive party to an action against another with like liability" and "Joinder of these tortfeasors continues to be regulated by Rule 20". Since the complaints at bar allege conditions of asbestosis resulting from exposure to products of both the solvent co-defendants and Unarco and/or J-M, the Chapter 11 debtors are joint tortfeasors and accordingly not indispensable. See also: In re Related Asbestos Cases, 23 B.R. 523 (N.D. Cal. 1982); Austin v. Unarco Industries, Inc., 705 F.2d 1 (1st Cir. 1983); Ashworth v. Johns-Manville Sales Corp., Case Nos. C78-470, C81-1545, C77-1088, C79-167 (N.D. Ohio Mar. 21, 1983); In re Stay of Proceedings Against Defendants Johns-Manville Corp. v. Unarco Industries, Inc., 99 Wash. 2d 193, 660 P.2d 271 (S.C.Wash.1983) (en banc) .
Last, the solvent co-defendants of Unarco and J-M implore this Court to invoke its inherent power to stay proceedings. Landis v. North American Co., 299 U.S. 248, 57 S. Ct. 163, 81 L. Ed. 153 (1936). It is submitted that the factors incorporated in Rule 19(b), Fed. R. Civ. P., as interpreted in Provident Tradesmens Bank & Trust Co. v. Patterson, 390 U.S. 102, 88 S. Ct. 733, 19 L. Ed. 2d 936 (1968), should be employed, by analogy, to determine of such inherent power should be exercised. Particularly, the solvent co-defendants conjecture that a continuation of proceedings in the absence of J-M and Unarco will result in multiple and piecemeal litigation on a scale heretofore unknown in the history of American jurisprudence; initial litigation would transpire in the state and federal forums and then duplicative litigation would issue in the respective bankruptcy forums for indemnity or contribution thereby adversely impacting upon valuable judicial resources and generating a risk of inadequate and conflicting adjudications. Additionally the solvent co-defendants assert that the automatic stay of 11 U.S.C. § 362 precludes discovery upon J-M and Unarco thereby seriously compromising their ability to successfully defend pending actions.
In Paden v. Union for Experimenting Colleges & Universities, 7 B.R. 289 (N.D. Ill. 1980), the stay was construed as designed to
Id. at 290 (describing the predecessor to Sec. 362). See also: In re Holtkamp, 669 F.2d 505 (7th Cir. 1982).