Opinion ID: 664912
Heading Depth: 2
Heading Rank: 2

Heading: Discharge of Liabilities

Text: 24 Forbes also asserts that the district court erred in determining that Winston's reorganization plan clearly discharged Winston II from all obligations or demands, including the possible liability on her tort claim. We agree. 25 Section 101(5) of the Bankruptcy Code defines claim, in relevant part, as a 26 right to payment, whether or not such right is reduced to judgment, liquidated, fixed, contingent, matured, unmatured, disputed, undisputed, secured or unsecured. 27 11 U.S.C. Sec. 101(5)(A) (emphasis added). However, determination of whether a claim arises in bankruptcy requires an analysis of interests created by non-bankruptcy substantive law. In re National Gypsum Co., 139 B.R. 397, 405 (N.D.Tex.1992); see also Kilbarr Corp. v. General Servs. Admin. (In re Remington Rand Corp.), 836 F.2d 825, 830 (3d Cir.1988) (explaining that unless state or federal law independently creates obligations, the bankruptcy court is not presented with a claim to either recognize or reject). 28 Forbes points out that under Louisiana law, a cause of action in tort accrues when the injured party has a right to sue. Cole v. Celotex Corp., 599 So.2d 1058, 1063 n. 15 (La.1992); see Trahan v. Liberty Mut. Ins. Co., 314 So.2d 350, 353 (La.1975) (determining that [t]he cause of action is the state of facts which gives a party a right to judicially assert an action against the defendant). Accordingly, she asserts that her cause of action accrued on December 24, 1985--the date on which the mobile home in question caught fire and allegedly emitted toxic gases, causing the deaths of the decedents--more than two years after Winston's reorganization plan was confirmed. Forbes thus argues that because she did not have a cause of action against Winston until December 1985, she did not have a claim which could have been dealt with during Winston's bankruptcy proceedings. 29 The legislative history of the Code indicates that Congress intended the term claim to be given broad interpretation so that all legal obligations of the debtor, no matter how remote or contingent will be able to be dealt with in the bankruptcy case. H.R.Rep. No. 595, 95th Cong., 1st Sess. 309 (1978), reprinted in 1978 U.S.C.C.A.N. 5787, 5963, 6266; see Ohio v. Kovacs, 469 U.S. 274, 279, 105 S.Ct. 705, 707, 83 L.Ed.2d 649 (1985). Based upon the legislative history of the Code and the express language of Sec. 101(5)(A), we have recognized that the definition of claim under the Code is much broader than that which existed under the former Bankruptcy Act. 7 See, e.g., Mooney Aircraft Corp. v. Foster (In re Mooney Aircraft Inc.), 730 F.2d 367, 375 n. 6 (5th Cir.1984). 30 The question of how broad the term claim is under the Code, especially as that term relates to unaccrued tort liability, is a complex one. Some courts have agreed with the view Forbes has taken in this case: a claim does not arise in bankruptcy until a cause of action has accrued under non-bankruptcy law. See, e.g., Avellino & Bienes v. M. Frenville Co. (In re M. Frenville Co.), 744 F.2d 332, 337 (3d Cir.1984), cert. denied, 469 U.S. 1160, 105 S.Ct. 911, 83 L.Ed.2d 925 (1985). Other courts, however, have rejected this theory on grounds that such a theory interprets the term claim more narrowly than Congress intended. See, e.g., In re A.H. Robins Co., 63 B.R. 986, 989-92 (Bankr.E.D.Va.1986), aff'd sub nom. Grady v. A.H. Robins Co., 839 F.2d 198 (4th Cir.), cert. dismissed, 487 U.S. 1260, 109 S.Ct. 201, 101 L.Ed.2d 972 (1988); Edge v. Roach (In re Edge), 60 B.R. 690, 696-705 (Bankr.M.D.Tenn.1986); In re Johns-Manville Corp., 57 B.R. 680, 686-90 (Bankr.S.D.N.Y.1986). Some courts that have rejected the accrual theory have determined that a right to payment, and thus a claim under the Code, arises at the moment the conduct giving rise to the alleged liability occurred. See, e.g., Grady v. A.H. Robins Co. (In re A.H. Robins Co.), 839 F.2d 198, 202-03 (4th Cir.), cert. dismissed, 487 U.S. 1260, 109 S.Ct. 201, 101 L.Ed.2d 972 (1988); Waterman S.S. Corp. v. Aguiar (In re Waterman S.S. Corp.), 141 B.R. 552, 556 (Bankr.S.D.N.Y.1992), vacated on other grounds, 157 B.R. 220 (S.D.N.Y.1993). These courts have concluded that if a debtor's conduct forming the basis of liability occurred pre-petition, a claim arises under the Code when that conduct occurs, even though the injury resulting from this conduct is not manifest at the commencement of the bankruptcy proceedings. See 3 DAVID G. EPSTEIN ET AL., BANKRUPTCY Sec. 10-32, at 61 (1992) (explaining that the group of persons having a claim against a debtor in bankruptcy arguably includes a tort claimant who has suffered an injury, but who is not yet aware of that injury). 31 For example, in A.H. Robins, the plaintiff had been inserted with a Dalkon Shield, a contraceptive intra-uterine device, manufactured and marketed by A.H. Robins Co. (Robins), prior to the time Robins filed its petition for reorganization under Chapter 11. 839 F.2d at 199. Shortly after Robins filed its petition, the plaintiff's injuries related to the Dalkon Shield became manifest, and she filed suit against Robins in federal district court. Id. She also filed a motion in the bankruptcy court, requesting that her claim not be stayed under the automatic stay provision of the Code because her claim arose post-petition. Id. The Fourth Circuit disagreed, stating that the plaintiff's claim was undoubtedly contingent in that it was dependent upon a future uncertain event, that event being the manifestation of injury from use of the Dalkon Shield. Id. at 203. The court went on to make it clear that it did not believe that 32 there must be a right to the immediate payment of money in the case of a tort or allied breach of warranty or like claim, as present here, when the acts constituting the tort or breach of warranty have occurred prior to the filing of the petition, to constitute a claim.... 33 Id. at 203. Thus, the court determined that the plaintiff's claim arose before the commencement of bankruptcy proceedings and as such was a pre-petition claim subject to the Code's automatic stay provision. Id.; see also Waterman, 141 B.R. at 556 (determining that a claim arose at the moment the plaintiffs came into contact with asbestos, even though their injury was not manifest until years later); Edge, 60 B.R. at 705 (concluding that a claim arose for purposes of the Code's automatic stay provision at the time the patient received negligent treatment from the debtor dentist). 34 Other courts have not viewed the timing of a debtor's negligent conduct as dispositive of when a claim arises under the Code. Instead, they have determined that a claim arises at the time of the debtor's negligent conduct forming the basis for liability only if the claimant had some type of specific relationship with the debtor at that time. 35 For example, in In re Piper Aircraft Corp., 162 B.R. 619 (Bankr.S.D.Fla.1994), Piper Aircraft Corp. (Piper) was attempting to reorganize under Chapter 11. Id. at 621. Assuming that aircraft designed and manufactured by Piper pre-petition would crash and injure persons and property post-petition, a legal representative filed a proof of claim on behalf of potential future claimants for $100 million. Id. at 621-22. This proof of claim was based on statistical assumptions regarding the number of people who were likely to suffer personal injury or property damage after Piper's reorganization plan was confirmed. Id. at 622. However, the Piper court disallowed this claim on grounds that the potential future claimants in this case did not have a claim as defined in section 101(5)(A) of the Code. Id. at 629. 36 The court began by clearly setting forth the problem posed before it in determining whether the future claimants had claims under the Code which could be affected by Piper's reorganization and the confirmation of its plan. The court stated: 37 We know that some planes in the existing fleet of Piper aircraft will crash, and we know that there may be injuries, deaths and property damage as a result. We also know that under theories of negligence and products liability, Piper, if it remains in existence, would be liable for some of these damages. Even so, there is no way to identify who the victims will be or to identify any particular prepetition contact, exposure, impact, privity or other relationship between Piper and these potential claimants that will give rise to these future damages. 38 Id. at 627. 39 The court also recognized that defining claim to include any ultimate right to payment arising out of pre-petition conduct would yield questionable results. Id. at 626. The court found particularly enlightening the Second Circuit's hypothetical that addressed this very issue, id. at 626-27, which follows: 40 Defining claims to include any ultimate right to payment arising from pre-petition conduct by the debtor comports with the theoretical model of assuring that all assets of the debtor are available to those seeking recovery for pre-petition conduct. But such an interpretation of claim yields questionable results. Consider, for example, a company that builds bridges around the world. It can estimate that of 10,000 bridges it builds, one will fail, causing 10 deaths. Having built 10,000 bridges, it becomes insolvent and files a petition in bankruptcy. Is there a claim on behalf of the 10 people who will be killed when they drive across the one bridge that will fail someday in the future? If the only test is whether the ultimate right to payment will arise out of the debtor's pre-petition conduct, the future victims have a claim. Yet it must be obvious that enormous practical and perhaps constitutional problems would arise from recognition of such a claim. The potential victims are not only unidentified, but there is no way to determine them. Sheer fortuity will determine who will be on that one bridge when it crashes. What notice is to be given to these potential claimants? 41 United States v. LTV Corp. (In re Chateaugay Corp.), 944 F.2d 997, 1003 (2d Cir.1991). The Piper court thus recognized that significant and possibly insurmountable due process problems existed in providing future claimants with constitutionally sufficient notice of Piper's bankruptcy proceedings to discharge their claims. Piper, 162 B.R. at 628; cf. Waterman, 157 B.R. at 222 (concluding that although a claim arose in bankruptcy at the moment a claimant was exposed to asbestos, potential future claims of individuals who had not manifested any detectable signs of disease when notice of the bar date was given were not dischargeable in the reorganization proceedings). 42 Accordingly, the court then determined that there must be some prepetition relationship, such as contact, exposure, impact, or privity, between the debtor's prepetition conduct and the claimant in order for a future claimant to have a claim under the Code. Piper, 162 B.R. at 627; see also In re Jensen, 995 F.2d 925, 930-31 (9th Cir.1993) (concluding that for a claim to arise under the Code, not only must a pre-petition relationship between the claimant and the debtor exist but also the claim must have been within the fair contemplation of the parties at the time of bankruptcy); Chateaugay, 944 F.2d at 1005 (finding that [t]he relationship between environmental regulating agencies and those subject to regulation provides sufficient 'contemplation' of contingencies to bring most ultimately maturing payment obligations based on pre-petition conduct within the definition of 'claims'); In re National Gypsum, 139 B.R. 397, 409 (N.D.Tex.1992) (determining that although a claim could arise in bankruptcy under the Code even though the cause of action on which the claim was based was not yet ripe for adjudication under relevant substantive law, the pre-petition conduct of the debtor must be such that the parties could fairly contemplate a problem in the future). Because the court found no such pre-petition relationship between the future claimants and Piper, the court disallowed the claim filed by the future claimants'  legal representative. Piper, 162 B.R. at 629. 43 We turn now to the instant case. The injury suffered, i.e., the death of the decedents, occurred simultaneously with the manifestation of that injury in December 1985, years after Winston's reorganization plan had been confirmed. The design and manufacture of the mobile home in question thus resulted in no tortious consequence until a fire started in that mobile home in December 1985. Further, there is no evidence in the record to indicate when Forbes and her family acquired this mobile home or from whom they acquired it. There is no evidence to establish that Winston, as the manufacturer of the mobile home in question, should have even known of Forbes' and her family's existence. 44 Where, as here, the injury and the manifestation of that injury occurred simultaneously--more than three years after Winston filed its petition and more than two years after the plan was confirmed, we think that, at a minimum, there must be evidence that would permit the debtor to identify, during the course of the bankruptcy proceedings, potential victims and thereby permit notice to these potential victims of the pendency of the proceedings. See Chateaugay, 944 F.2d at 1003; Piper, 162 B.R. at 628. This record is devoid of any evidence of any pre-petition contact, privity, or other relationship between Winston, on the one hand, and Forbes or the decedents, on the other. We think the absence of this evidence precludes a finding by the district court that the claims asserted by Forbes were discharged in Winston's bankruptcy proceedings. See Chateaugay, 944 F.2d at 1005; Piper, 162 B.R. at 627; Gypsum, 139 B.R. at 409. 45 Our decision is not inconsistent with the broad definition of claim suggested by the statutory language and legislative history of Sec. 101(5) of the Code. In our view, however, even the broad definition of claim cannot be extended to include Forbes or the decedents as claimants whom the record indicates were completely unknown and unidentified at the time Winston filed its petition and whose rights depended entirely on the fortuity of future occurrences. We do not here decide whether if evidence of some pre-petition relationship between Winston and Forbes or the decedents had been adduced, we might nonetheless conclude that neither Forbes nor the decedents had a claim or that any such claim had not been discharged in bankruptcy. We need not reach that question on this record. We merely conclude that under the specific facts of this case, the district court erred in determining that because Winston had been discharged from all obligations and demands when Winston's reorganization plan was confirmed, Universal--as a successor corporation--could not be potentially liable on Forbes' tort claim. Summary judgment for Universal was therefore improper.