Opinion ID: 778762
Heading Depth: 3
Heading Rank: 2

Heading: District Court's Rationale for Denial of Transfer

Text: 40 The District Court denied the Defendants' motion to transfer after holding that it lacked subject-matter jurisdiction over the Friction Product Claims because they were not related to Federal-Mogul's bankruptcy proceeding. That holding, in turn, was based on its understanding of this court's decision in Pacor Inc. v. Higgins (In re Pacor), 743 F.2d 984 (3d Cir.1984), where we interpreted the scope of the statutory related to jurisdiction of bankruptcy courts. 41 In Pacor, John and Louise Higgins sued Pacor in Pennsylvania state court for work-related injuries to John Higgins caused by exposure to asbestos supplied by Pacor. Pacor filed a third-party complaint impleading Johns-Manville, the manufacturer of the asbestos. Thereafter, Manville filed for Chapter 11 bankruptcy in the Southern District of New York. Pacor filed a petition for removal in the Bankruptcy Court for the Eastern District of Pennsylvania seeking to remove the Higgins' case from state court to federal bankruptcy court and simultaneously to transfer it from that court to the New York district court where it would be joined with the rest of the Johns-Manville bankruptcy proceedings. The theory of Pacor's petition was that the Higgins suit was related to the Manville bankruptcy proceeding. The bankruptcy court denied the petition and remanded the case. Pacor, 743 F.2d at 986-87. We affirmed. Analyzing the related to provision, we concluded: 42 [T]he primary action between Higgins and Pacor would have no effect on the Manville bankruptcy estate, and therefore is not related to [the Manville] bankruptcy [proceeding]. At best, it is a mere precursor to the potential third party claim for indemnification by Pacor against Manville. Yet the outcome of the Higgins-Pacor action would in no way bind Manville, in that it could not determine any rights, liabilities, or course of action of the debtor. Since Manville is not a party to the Higgins-Pacor action, it could not be bound by res judicata or collateral estoppel. Even if the Higgins-Pacor dispute is resolved in favor of Higgins (thereby keeping open the possibility of a third party claim), Manville would still be able to relitigate any issue, or adopt any position, in response to a subsequent claim by Pacor. Thus, the bankruptcy estate could not be affected in any way until the Pacor-Manville third party action is actually brought and tried. 43 Id. at 995 (citations omitted). 44 The arguments made by Pacor were not dissimilar to those made by Defendants here, but we rejected them, saying: 45 Pacor stresses that the Higgins-Pacor claim would affect the Manville bankruptcy estate, in that without a judgment for plaintiff Higgins in that action, there could never be a third party indemnification claim against Manville. This argument does not alter our conclusion. At best, one could say that a judgment against the plaintiff on the primary claim would make absolutely certain that the Manville estate could never be adversely affected. This does not prove the converse, however, that a judgment in favor of the plaintiff Higgins necessarily does affect the estate. The fact remains that any judgment received by the plaintiff Higgins could not itself result in even a contingent claim against Manville, since Pacor would still be obligated to bring an entirely separate proceeding to receive indemnification. 46 Id. (emphasis in original). 47 Thus, the District Court interpreted Pacor and its progeny to hold that related-to bankruptcy jurisdiction will not extend to a dispute between non-debtors unless that dispute, by itself, creates at least the logical possibility that the estate will be affected. Feb. 15 Op. at 17. 48 Pacor has been favorably cited in dozens of decisions of this court. As we have observed: 49 The test ... articulated in Pacor has been enormously influential. Pacor not only governs our analysis here, but its cogent analytical framework has been relied upon by our sister circuits more than any other case in this area of the law.... 50 Even for those circuits that have not formally adopted Pacor, [it] has provided an indispensable and frequently cited frame of reference, a veritable beacon on the uncharted and perilous waters of bankruptcy subject matter jurisdiction. The references to Pacor in Shepard's Citations are legion. When federal courts must consider whether an issue is a related proceeding, the starting point has universally been Pacor. 51 Torkelsen v. Maggio (In re Guild & Gallery Plus, Inc.), 72 F.3d 1171, 1181 & n. 5 (3d Cir.1996). 52 Pacor clearly remains good law in this circuit. 8 Under our operating procedures, we cannot revisit Pacor unless we are sitting en banc. Moreover, the Supreme Court has endorsed the core of this court's opinion in Pacor, saying: 53 We agree with the views expressed by the Court of Appeals for the Third Circuit in Pacor ... that Congress intended to grant comprehensive jurisdiction to the bankruptcy courts so that they might deal efficiently and expeditiously with all matters connected with the bankruptcy estate, and that the related to language of § 1334(b) must be read to give district courts (and bankruptcy courts under § 157(a)) jurisdiction over more than simply proceedings involving the property of the debtor or the estate. We also agree with that court's observation that a bankruptcy court's related to jurisdiction cannot be limitless. 54 Celotex Corp. v. Edwards, 514 U.S. 300, 308, 115 S.Ct. 1493, 131 L.Ed.2d 403 (1995) (citations omitted) (citing and quoting Pacor, 743 F.2d at 994) (emphasis added). The Supreme Court noted the general acceptance of Pacor, commenting that all of the courts of appeal have adopted the Pacor test with little or no variation with the exception of the Second and Seventh Circuits, which have adopted slightly different tests. Id. at 308-309 n. 6, 115 S.Ct. 1493. 55 Notwithstanding the widespread acceptance of Pacor, Defendants argue that the Friction Product Claims are related to the Federal-Mogul bankruptcy proceeding because the various claims against them could lead to substantial indemnification or contribution claims against Federal-Mogul, which would in turn significantly affect the administration of the bankruptcy estate and the development of an appropriate plan of reorganization. They focus on our articulation of the Pacor test for related to jurisdiction as whether the outcome of that proceeding could conceivably have any effect on the estate being administered in bankruptcy.  Pacor, 743 F.2d at 994 (emphasis in original). Defendants emphasize that in Pacor we stated that a civil proceeding need not necessarily be against the debtor to give rise to related to jurisdiction; it is enough that the outcome of such a proceeding could alter the debtor's rights, liabilities, options, or freedom of action. Id. They argue that the outcome of the Friction Product Claims could conceivably have an effect on Debtors' estate, because it is conceivable that if the Friction Product Plaintiffs succeed in their claims against them, the Friction Product Defendants would seek indemnification and/or contribution from Federal-Mogul. 56 Their reading of the word conceivable ignores the precise holding of Pacor where, despite the seemingly broad language of the opinion, we found no related to jurisdiction for the Higgins lawsuit against Pacor because the outcome of that lawsuit could not result in even a contingent claim against the debtor (Manville); rather, an entirely separate proceeding to receive indemnification would have been required. Id. at 995. The test articulated in Pacor for whether a lawsuit could conceivably have an effect on the bankruptcy proceeding inquires whether the allegedly related lawsuit would affect the bankruptcy proceeding without the intervention of yet another lawsuit. Therefore, because any indemnification claims that the Friction Product Defendants might have against Debtors have not yet accrued and would require another lawsuit before they could have an impact on Federal-Mogul's bankruptcy proceeding, we cannot hold that the District Court's ruling that it lacked subject-matter jurisdiction because the Friction Product Claims were not related to the Federal-Mogul bankruptcy proceeding was a clear error ... approach[ing] the magnitude of an unauthorized exercise of judicial power. Lusardi v. Lechner, 855 F.2d 1062, 1069 (3d Cir.1988) (citing Will v. Calvert Fire Ins. Co., 437 U.S. 655, 661, 98 S.Ct. 2552, 57 L.Ed.2d 504 (1978)). We therefore conclude that the District Court's decision does not justify issuance of a writ of mandamus. 57 The arguments by the Friction Product Defendants for the existence of related to bankruptcy jurisdiction draw heavily on the decision of the Sixth Circuit in Dow Corning, 86 F.3d 482 (6th Cir.1996). Dow Corning, the largest producer of silicone-gel breast implants, also sold silicone materials to other manufacturers of such implants. It and other manufacturers and suppliers of silicone implants were sued by thousands of recipients of the implants for personal injuries related to the silicone implants. Dow Corning filed for Chapter 11 bankruptcy. The bankruptcy filing automatically stayed all of the silicone implant cases against it, but not the claims against Dow Chemical and Corning, Inc. (its co-defendants as well as its shareholders) or the claims against the other three co-defendants. As in this case, the various co-defendants removed many of these personal injury claims from state court to federal court. Dow Corning then moved to transfer the removed cases to the district court that had jurisdiction over its Chapter 11 proceedings, and the co-defendants joined in its motions, relying on the related to provision of the Bankruptcy Code. The district court held that it did not have related to jurisdiction over the claims against the co-defendants but the court of appeals, citing Pacor, reversed. 58 After noting that Dow Corning's co-defendants may have thousands of claims of indemnification and contribution against Dow Corning and that Dow Corning may have similar claims against them, the court concluded that the district court had related to jurisdiction over the silicone implant claims of Dow Corning's non-shareholder co-defendants based on the following reasoning: 59 We find that it is not necessary for the appellees first to prevail on their claims against the nondebtor defendants, and for those companies to establish joint and several liability on Dow Corning's part, before the civil actions pending against the nondebtors may be viewed as conceivably impacting Dow Corning's bankruptcy proceedings. The claims currently pending against the nondebtors give rise to contingent claims against Dow Corning which unquestionably could ripen into fixed claims. The potential for Dow Corning's being held liable to the nondebtors in claims for contribution and indemnification, or vice versa, suffices to establish a conceivable impact on the estate in bankruptcy. Claims for indemnification and contribution, whether asserted against or by Dow Corning, obviously would affect the size of the estate and the length of time the bankruptcy proceedings will be pending, as well as Dow Corning's ability to resolve its liabilities and proceed with reorganization. 60 Dow Corning, 86 F.3d at 494 (emphasis added). The court concluded: 61 Cognizant of the fact that related to jurisdiction cannot be limitless and concerned about granting benefits of the automatic stay in bankruptcy to solvent codefendants, we nevertheless believe the possibility of contribution or indemnification liability in this case is far from attenuated. We conclude that Section 1334(b) jurisdiction exists over the actions pending against [Dow Corning's co-defendants]. 62 Id. 63 The Dow Corning court distinguished Pacor as follows: 64 In addition, we believe there is a qualitative difference between the single suit involved in Pacor and the overwhelming number of cases asserted against Dow Corning and the nondebtor defendants in this case. A single possible claim for indemnification or contribution simply does not represent the same kind of threat to a debtor's reorganization plan as that posed by the thousands of potential indemnification claims at issue here. 65 Id. 66 The Friction Product Defendants extrapolate from Dow Corning a rule that related to jurisdiction exists over claims against non-debtors when these non-debtors have potential contribution and indemnification claims. However, they cannot persuasively argue that Dow Corning rather than Pacor should have provided the rule of law the District Court should have followed. The District Court stated that it was: 67 unconvinced by the Dow Corning panel's main point of distinction between that case and Pacor. The Sixth Circuit reasoned that Pacor contained only one claim, whereas in Dow Corning many thousands of plaintiffs were suing the non-debtors. This Court regards with misgiving the proposition that mere numbers of claims should prevail over articulable principles when it comes to defining federal subject matter jurisdiction. 68 Feb. 15 Op. at 15-16. 69 The District Court referred only briefly to the Fifth Circuit's decision in Arnold v. Garlock, Inc., 278 F.3d 426 (5th Cir.2001), reh'g denied, 288 F.3d 234 (2002), which presents issues like those before us. Like the Friction Product Defendants here, Garlock, a co-defendant of Federal-Mogul in over eighty asbestos-related tort cases, removed the tort claims against it and moved for transfer to the Federal-Mogul bankruptcy proceeding. Garlock made the same arguments that Defendants make before us, and relied on Dow Corning to support related to jurisdiction. The Fifth Circuit distinguished Dow Corning saying: 70 In In re Dow Corning, the Sixth Circuit reversed and ordered the United States District Court for the Eastern District of Michigan to transfer under § 157(b)(5) a relatively small number of non-debtor co-defendants who had asserted claims for contribution, or announced the intent of doing so, against the debtor manufacturer of silicone breast implants. In re Dow Corning, 86 F.3d at 498. In that case, each of the co-defendants was closely involved in using the same material, originating with the debtor, to make the same, singular product, sold to the same market and incurring substantially similar injuries. This circumstance created a unity of identity between the debtor and the co-defendants not present here, where the co-defendants variously use asbestos for brake friction products, insulation, gaskets, and other uses. 71 Therefore, while we do not disagree that certain mass tort claims in some circumstances might be consolidated with bankruptcy proceedings in a single district in accordance with § 157(b)(5), the relationship of the co-defendants in ... In re Dow Corning is distinguishable from Garlock's asserted relationship, through a claim for contribution, to the debtor here. 72 Id. at 440. The Fifth Circuit's analysis in Garlock of the related to provision of the Bankruptcy Code is consistent with the result on the same issue reached by the District Court in this case. 73 We, however, remain a step away from reaching the merits of whether the District Court has related to jurisdiction. Instead, because our appellate jurisdiction is at issue, we review the District Court's denial of Defendants' transfer motion in the context of deciding whether to grant a writ of mandamus. We have recently stated that a writ of mandamus may issue only if the district court committed a `clear error of law' at least approach[ing] the magnitude of an unauthorized exercise of judicial power, or a failure to use that power when there is a duty to do so, Trans Penn Wax Corp. v. McCandless, 50 F.3d 217, 227 (3d Cir.1995) (alteration in original) (quoting Richman Bros. Records, Inc. v. U.S. Sprint Communications Co., 953 F.2d 1431, 1448 (3d Cir.1991) (quotation omitted)), and only when the party seeking [mandamus] demonstrates a clear and indisputable right to [it]. Id. (citing Carteret Sav. Bank, 919 F.2d at 232). 74 The Friction Product Defendants have not met this rigorous standard for the issuance of the extraordinary writ of mandamus as to the District Court's denial of the motion to transfer. See, e.g., In re United States, 273 F.3d at 385; Solomon v. Cont'l Am. Life Ins. Co., 472 F.2d 1043 (3d Cir.1973) (denying petition for mandamus regarding a transfer order). See also Dalton v. United States (In re Dalton), 733 F.2d 710, 716-18 (10th Cir.1984) (same in the bankruptcy context); In re McDonnell-Douglas Corp., 647 F.2d 515, 517 (5th Cir.1981) (same); Toro Co. v. Alsop, 565 F.2d 998 (8th Cir.1977) (denial of mandamus petition regarding transfer in anti-trust context); 16 Charles Alan Wright, Arthur R. Miller & Edward H. Cooper, Federal Practice & Procedure § 3935.4, at 619-26 (2d ed.1996) (discussing use of mandamus applied to transfer orders). We will deny the request to issue a writ of mandamus to compel the District Court to transfer the Friction Product Claims under § 1334(b).