Court Opinion

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Date Created: 2015-10-13 21:59:43.023071+00
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Opinions of the United
2004 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit

7-20-2004

In Re: Armstrong
Precedential or Non-Precedential: Non-Precedential

Docket No. 02-1057

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Recommended Citation
"In Re: Armstrong " (2004). 2004 Decisions. Paper 486.
http://digitalcommons.law.villanova.edu/thirdcircuit_2004/486

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                                                                 NOT PRECEDENTIAL

                       UNITED STATES COURT OF APPEALS
                            FOR THE THIRD CIRCUIT

                                      No. 02-1057

                    IN RE: ARMSTRONG WORLD INDUSTRIES, INC.,
                                                        Debtors

                    ARMSTRONG WORLD INDUSTRIES, INC.,
                                                Appellant

                                ___________________

                          On Appeal from the United States
                       District Court for the District of Delaware
                           District Court Number: 00-04471
                       District Judge: Hon. Joseph J. Farnan, Jr.

                   Submitted Pursuant to Third Circuit LAR 34.1(a)
                                 February 13, 2003

       BEFORE: ALITO, McKEE, Circuit Judges & SCHWARZER District Judge*

                                 (Filed July 20, 2004)

                                       OPINION

McKee, Circuit Judge

       Armstrong World Industries, Inc. (“AWI”) appeals from the December 10, 2001

Memorandum Order (“December Order”) of the United States District Court for the

   *
    Honorable William W Schwarzer, Senior District Judge, Northern District of
California sitting by designation.
District of Delaware, granting relief from the automatic stay set forth in 11 U.S.C. § 362.

The December Order permitted the “Maertin Plaintiffs” to proceed with their action

against AWI outside of the bankruptcy court process based upon the findings the court set

forth in its December Order. This appeal eventually followed.

                                               I.

       Inasmuch as we write only for the parties who are familiar with the factual

background and procedural intricacies of this case, we will not reiterate the facts or

procedural posture except as may be necessary to our brief discussion.

       AWI raises three issues on appeal. It argues that the District Court erred in

granting relief from the automatic stay by misapplying the applicable standard under §

362(d)(1) and concluding that AWI was solvent. Second, it argues that the court erred as

a matter of law in granting relief from the automatic stay; and third, it argues that the

court “abuse[d] its discretion or commit[ted] a plain error of law in making ostensible

factual findings . . . without an evidentiary record . . . and without permitting the parties

to make such a record [].” Appellant’s Br. at 5.

                                              II.

       Although AWI’s brief sets forth three separate issues on appeal, the arguments are,

in reality, alternative statements of AWI’s contention that the District Court erred in

granting relief from the automatic stay.

       After the District Court granted the plaintiffs’ motion for relief from the automatic

                                               2
stay, and following additional proceedings in Delaware and New Jersey, the parties

entered into a stipulation before the Bankruptcy Court, and that court entered an order

approving that stipulation on May 3, 2002 (the “Stipulation”). Pursuant to the terms of

that Stipulation, the parties agreed that “The Maertin Plaintiffs may proceed with the

Civil Action and pursue any rights that they may be permitted under applicable state and

federal law in connection with that action, in state or federal court.” App. I-A72. The

Stipulation further provided that “notwithstanding [the aforementioned agreement], the

automatic stay shall remain in effect with respect to, . . . any claims, judgment or

settlement against AWI . . . other than with respect to the Insurance Policies or the

Insurance Proceeds.” Id. Thus, the Maertin Plaintiffs must first seek approval of the

Bankruptcy Court before attempting to collect “any claims against AWI . .. other than

insurance policies.”

       AWI’s challenge to the December Order is grounded on AWI’s contention that the

Maertin Plaintiffs should not be allowed to attempt to collect their prepetition, unsecured

claims against AWI’s estate outside of the bankruptcy process. The May 3 Stipulation

resolves that issue. By agreeing that the plaintiffs may proceed against the insurance

proceeds at issue with a reservation that they must seek approval of the Bankruptcy Court

for any other relief, AW I’s appeal is mostly mooted as the Maertin Plaintiffs quite

correctly note in their brief. See Brief at 4-5. See also Flast v. Cohen, 392 U.S. 83, 95

(1968). See California v. San Pablo & T.R. Co., 149 U.S. 308 (1893).

                                              3
       We can, for the most part, dispose of any remaining issues by noting that the District

Court explained why relief from the automatic stay was appropriate as well as the findings of

fact supporting that relief in its December Order. We can affirm substantially for the reasons

set forth therein. AWI does not allege that the District Court applied the wrong standard, only

that it misapplied the appropriate standard by finding “cause” to lift the stay under the three

prong inquiry set forth in Int’l Business Machines v. Fernstrom Storage and Van Co., 938
F.2d 731, 734-37 (7th Cir. 1991) without a proper evidentiary record. The Maertin Plaintiffs

represent, without contradiction that “AWI acquiesced throughout the entire proceedings

below to limit the record to legal argument[.]” Brief at 28. The Martin Plaintiffs therefore

argue that AWI can not now complain about insufficient support for the equitable inquiry

under In re Wilson, 116 F.3d 87, 89 (3d Cir. 1997), and similar cases cited in AWI’s brief.

See AWI’s Brief at 16. We agree.

       When the court afforded AWI an opportunity to present witnesses, the court was

informed that the parties were working toward an agreement that would allow the Maertin

Plaintiffs to collect the prepetition claims from AWI’s insurance policies. See App. Vol II,

A65-6, and A73. Accordingly, the court acquiesced and allowed additional time for the

parties to enter into a stipulation that would satisfy the settlement agreement from those

policies outside of the bankruptcy proceedings. We will not now allow AWI to hoist the

Maertin Plaintiffs on the petards of the very settlement the parties negotiated to resolve the

                                               4
issues raised in this appeal and before the Bankruptcy Court.1

                                               III.

         Before concluding we need to briefly address one remaining issue. In its January 16,

2003 letter brief, AWI attempts to suggest that the Stipulation does not render its appeal moot

because it does not address the appropriate standard of review “the Bankruptcy Court should

apply” if the Maertin Plaintiffs apply for relief beyond the scope of the insurance policies.

That “argument” appears, at best, disingenuous. No such issue was raised in AWI’s brief to

us, nor could it have been. To the extent that any such issue exists, it is best resolved by the

Bankruptcy Court if, and when, the Maertin Plaintiffs apply for such relief. We can not, and

will not, allow AWI to breathe life into this largely mooted appeal by raising that specter for

the first time before us. See In re Rickel Home Centers, Inc., 209 F.3d 291, 307 (3d Cir.

2000).

                                               IV.

         Accordingly, for all the reasons set forth herein, we will affirm the December Order.

   1
     Although AWI’s appeal seeks to reverse the December Order, the Stipulation that
AWI knowingly entered into with the M aertin Plaintiffs has precisely the same result
insofar as the insurance policies are concerned. Plaintiffs are attempting to satisfy the
settlement agreement from the proceeds of those policies and only those policies. Thus,
AWI is inviting this court to void the Stipulation it willingly negotiated. That is an
invitation we must enthusiastically decline.

                                                5