Case 1:07-cv-00609-RLB
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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE
INRE:
R. Grace & Co. et al.
Debtors.
Chapter 11
Case No. 01- 01139
(JKF)
Adv. Proc. No. 01- 771
Jointly Administered
Libby Claimants
Appellants
1 :07-cv- 00609 Hon. Ronald L. Buckwalter United States District Judge
R. Grace & Co. et al.
Appellees.
APPELLANTS' REPLY BRIEF
Adam G. Landis (No. 3407) Kerri K. Mumford (No. 4186) Landis Rath & Cobb LLP 919 Market Street , Suite 600 O. Box 2087 Wilmington , DE 19801 (302) 467- 4400
Daniel C. Cohn Christopher M. Candon Cohn Whitesell & Goldberg LLP 101 Arch Street Boston , MA 02110 (617) 951- 2505
December 3 , 2007
Case 1:07-cv-00609-RLB
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TABLE OF CONTENTS
TABLE OF AUTHORITIES.......................................................................................................... ii
ARGUMENT ...................................................................................................................................
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TABLE OF AUTHORITIES
Cases
Carol Gerard v. W. R. Grace & Co. (In re W. R. Grace & Co. 115 Fed. Appx. 565 (3d Cir. 2004) ..................................................................................................
Educational Testing Services v. Katzman , 793 F.2d 533 (3d Cir. 1986) .......................................
In re Ben Franklin Hotel Assocs. , 186 F. 3d 301 (3d Cir. 1999) .....................................................
In re Combustion Engineering, Inc. , 391 F. 3d 190 (3d Cir. 2004) .............................................
mandamus denied In re Federal- Mogul Global, Inc. , 282 B.R. 301 (D. Del.), cert denied sub nom 300 F. 3d 368 (3d Cir. 2002), Daimler Chrysler Corp. v. Official Comm. of Asbestos Claimants , 537 U. S. 1148 (2003) ..........
Nutrasweet Co. v. Vit- Mar Enterprises, Inc. , 112 F. 3d 689 (3d Cir. 1997) ...................................
Orr v. State of Montana , 106 P. 3d 100 (Mont. 2004) .....................................................................
Ortho Pharm. Corp. v. Amgen, Inc. , 882 F.2d 806 (3d Cir. 1989) .................................................
Pacor, Inc. v. Higgins , 743 F.2d 984 (3d Cir. 1984) ......................................................................
Pan American World Airways, Inc. v. Flight Engineers ' Int' l Ass 306 F . 2d 840 (2d Cir. 1962) ............................................ ................................................................
Sampson v. Murray , 415 U. S. 61 (1974) ........................................................................................
Stetson v. Howard D. Wolf & Assocs. , 955 F.2d 847 (2d Cir. 1992) ...........................................
Statutes
11 U. S.
c.
11 U . S. C.
9 524(g) ..........................................................................................................................
28 U.
C. 9 1292( a) ... ................ ............................
Fed. R. Civ. P. 65 .........................................................................................................................
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ARGUMENT
Almost six months since the Bankruptcy Court improperly enjoined the BNSF Litigation
and nearly two years since it improperly enjoined the State Litigation , Grace and the State have
again filed briefs evincing a strategy to prolong the unwarranted delay rather than even
attempting to defend the appropriateness of the Stay Order. Without any sense
and the State argue that the Bankruptcy Court should be granted more " breathing room " to
decide the merits of the Motions for Reconsideration and the BNSF Injunction Motion - this
while many of the Libby Claimants are on oxygen , struggling for each breath they take , and
deprived of the end-stage care that they desperately need.
Since the Bankruptcy Court enjoined the State Litigation in December 2005 , 14 Libby
Claimants have died of asbestos-related disease ? If
conformity with the Fed. R. Civ. P. 65 , many of the cases against the State would have gone to
trial or settled , and there would likely have been additional settlements with BNSF as well. Not
only has Grace s bankruptcy case languished for more than six years , but this same paralysis has
been unjustly extended to litigation that would otherwise have reached a
with humane results-in
the courts of Montana. The unconscionable harm suffered by the Libby
Claimants demonstrates why Rule 65 imposes hard-and- fast deadlines for injunction requests to
be determined on the merits.
In its opening brief, Grace addresses the balance of harms.
vacating the
1 All capitalized terms are used in accordance
' Brief, which
was filed with this Court on October 25 2007.
2 (Adversary Proc. D. l. 459 , Ex. B.
3 Grace Brief at pp. 10- 11.
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Stay Order... would leave Grace vulnerable "
in the State Litigation and BNSF Litigation. 4
As a
matter of law , Grace cannot be harmed in the Montana state court litigation.
Engineering, Inc. , 391 F. 3d 190 (3d Cir. 2004);
see also
In re Combustion
Libby Claimants ' Brief at pp 18- 28.
In
stark contrast , the Libby Claimants are at this moment , and continuously, suffering extreme
hardship. Libby Claimants are dying of asbestos disease , struggling for precious air , and they are
not receiving the 24- hour care they need. 5 The Grace Medical Plan plainly refuses to pay for it.
The harm is extreme. The Libby Claimants need to have their state court remedy restored
against defendants who could never obtain a Section 524(g) injunction in Bankruptcy Court.
The Libby Claimants reply to the appellees ' briefs as follows:
1. Grace and the
federal court jurisprudence of a new category of stay order that is " neither a temporary
restraining order nor a permanent injunction. ? The need to be filled by this new type of
stay order-providing time for the court to decide the merits of the injunctionprecisely what courts have recognized as the purpose of a temporary restraining order:
The purpose of a temporary restraining order is to preserve an existing situation in status
quo until the court has an opportunity to pass upon the merits of the demand for a
preliminary injunction.
Pan American World Airways, Inc. v. Flight Engineers ' Int'
Ass
, 306 F.2d 840 , 842- 43 (2d Cir. 1962). The Supreme Court has ruled that
no new type of stay order in injunction proceedings that escapes the time restrictions of
See Affidavit of Dr. C. Brad Black , ~ 7 (Adversary Proc. D. l. 417.
7 Grace Brief at p. 5;
see also
State Brief at p. 4.
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Rule 65.
Sampson v. Murray,
415 U. S. 61 , 86- 88
(1974)(no matter how denominated by
the court , a restraining order that extends beyond the time permitted under Rule 65(b)
acts as a preliminary injunction);
Nutrasweet Co. v. Vit- Mar Enterprises, Inc. , 112 F.
Sampson and
689 (3d Cir. 1997)(same). Tellingly, Grace and the State fail to address
Nutrasweet in their respective briefs. Grace s efforts at avoidance notwithstanding, the
Bankruptcy Court' s order is a preliminary injunction. The legal effect of such definition
is clear , and no imaginary new category of stay in injunction proceedings from Grace can
change that.
2. Grace
s reliance on the
Ortho Pharm. decision s is misplaced because in that case , the
traditional prerequisites for the entry of a preliminary injunction were found by the lower
court to exist.
Ortho Pharm. , 882 F.2d at 809. The Bankruptcy Court made no such
determination in this instance before enjoining the State Litigation and BNSF Litigation.
3. Contrary to Grace
s assertions otherwise lo this Court may consider the full merits of the
appeal. The Libby Claimants assert that the record
support either related- to jurisdiction or the merits of the requested injunction.
See In re
Ben Franklin Hotel Assocs. , 186 F. 3d
301 ,
306 (3d Cir. 1999) (" Because the record has
been sufficiently developed for us to resolve this legal issue , we need not remand to the
Ortho Pharm. Corp. v. Amgen. Inc. 882 F. 2d 806
813 (3d Cir. 1989).
See Grace Brief at p. 6.
Ortho Pharm. the injunction Ortho Pharm. 882 2d at 813. Here , the injunction enjoins the State Litigation and BNSF Litigation from proceeding against nondebtor third parties.
Ortho Pharm.
is distinguishable from the case at hand for another reason as well. In stayed matters in the instant case from proceeding pending arbitration between the same parties.
10 Grace
11.
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District Court to consider it in the first instance. "
see also Stetson v. Howard D. Wolf &
Assocs. , 955 F. 2d 847 850- 51 (2d Cir. 1992) (" An appellate court has the power to
decide cases on appeal if the facts in the record adequately support the proper result. "
Since the Bankruptcy Court took sub judice
the question whether there is jurisdiction and
if so , grounds to issue the injunction sought by Grace , the record is sufficient for this
Court to reach the same issue. Grace declined to offer any testimony, or even affidavits
in support of the requested injunctions , so the usual considerations regarding a trial
court' s evaluation of evidence do not apply.
4. Only the
s requested injunctions on the merits.
By arguing that this Court should follow the Third Circuit's expressly non- precedential
decision in
Gerard 11
Combustion Engineering
s precedential decisions in
Pacor
Federal- Mogul 13 and
14 the
Bankruptcy Court' s lack of jurisdiction to enjoin the State Litigation is firmly established
by the precedential decisions. Indeed , the Bankruptcy Court so held in its own April
2007 decision. With the weight of authority so clearly
this Court should rule on the merits that the Bankruptcy Court lacks jurisdiction to enjoin
the State Litigation and the BNSF Litigation.
11
Carol Gerard v. W. R. Grace & Co. (In re W. R. Grace & Co. , 115 Fed. Appx. 565 (3d Cir. 2004).
12
Pacor. Inc. v. Higgins , 743 F.2d 984 (3d Cir. 1984).
In re Federal- Mogul Global. Inc. ,
282 B.R. 301 (D. Del.),
13
mandamus denied ,
300 F.3d 368 (3d Cir. 2002),
cert
denied sub nom Daimler Chrysler Corp. v. Official Comm. of Asbestos Claimants , 537 U.S. 1148 (2003).
14
Combustion Engineering , 391 F.3d 190.
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5. If
the Stay Order.
, it may do so only after vacating
Educational Testing Services v. Katzman , 793 F. 2d
533 , 546- 47
(3d Cir.
1986) (a reviewing court has no discretion to leave a defective preliminary injunction in
place). In arguing to the contrary,
consider decisions from other circuits that directly contravene established Third Circuit
precedent in the form ofthe
Educational Testing decision. Grace attempts to
from the present case on the grounds that
Educational Testing
Educational Testing
expressly based on ' the congressional purpose of affording prompt review of preliminary
injunction orders expressed in 28 U. C. 9 1292(a)' . . . which by its plain terms does not
apply to appeals from bankruptcy courts to district cOurtS. ,,J5 This is a non-sequitur.
Why would the absence of a Congressional purpose to afford prompt review of
bankruptcy court injunctions (a premise that the Libby Claimants strongly dispute
argue for leaving in place an injunction that the District Court determined to be invalid?
If District Court review were long delayed , wouldn t justice require that the invalid
injunction be vacated?
6. The Stay Order
Although Grace and the State have argued that the Stay Order preserves the status quo
in fact the Bankruptcy Court' s stay orders have radically altered the status quo. The State
Litigation and the BNSF Litigation were not barred by the automatic stay 1S
IS
See See
Grace Brief at p. 10 (quoting
Educational Testing ,
793 F.2d at 547).
16
Libby Claimants '
Opposition to Motion ofW. R. Grace to Dismiss Appeal at pp. 5-
17
See Grace Brief at p. 6; State Brief at p. 3.
18 See 11 U.
c. ~ 362(a) (barring only litigation
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preliminary injunction entered by the Bankruptcy Court shortly after Grace s
Chapter 11
filing. 19 Even after Grace entered bankruptcy, the State Litigation and the BNSF
Litigation proceeded for years uninterrupted by and without involvement of Grace. At
long last , the Libby Claimants-having defeated the State s motion to dismiss20 and
having obtained trial dates against
State and BNSF. Delaying their day in court has severe consequences for the Libby
Claimants. No court order can stay their struggle for precious air to breathe. They
continue to suffer and die without the 24- hour care that they need and deserve. Whether
this Court reaches the merits or remands to the Bankruptcy Court , justice requires that the
Stay Order be vacated immediately.
19
l. 87.
20
Orr v. State of Montana , 106 P. 3d
100 (Mont. 2004).
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Dated: December 3 2007
LANDIS RA TH & COBB
Wilmington , Delaware
Adam G. Landis
Kerri Mumford (No. 4186) 919 Market Street , Suite 600 O. Box 2087 Wilmington , DE 19801 Telephone: (302) 467- 4400 Facsimile: (302) 467- 4450 Email: landis~lrclaw. com mumford~lrclaw. com
- and -
Daniel C. Cohn Christopher M. Candon
COHN & WHITESELL LLP
101 Arch Street Boston , MA 02110
Telephone: (617) 951- 2505
Facsimile: (617) 951- 0679
Email: cohn~cwgll. com candon~cwg 11. com
Counsel to the Libby Claimants
Case 1:07-cv-00609-RLB
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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE
INRE:
R. Grace & Co.
et at.
Chapter 11
Case No. 01- 01139 (JKF)
Adv. Proc. No. 01- 771
Debtors.
Jointly Administered
Libby Claimants
Appellants
1 :07-cv- 00609 Hon. Ronald L. Buckwalter United States District Judge
R. Grace & Co. et at.
Appellees.
AFFIDAVIT OF SERVICE
STATE OF DELA WARE
) SS
NEW CASTLE COUNTY
Cathy A. Adams , being duly sworn according to law , deposes and says that she is employed by the law firm of Landis Rath & Cobb LLP , attorneys for the Libby Claimants in the above-referenced cases , and on the 3rd day of December , 2007 , a copy of the following
APPELLANTS' REPLY BRIEF
was caused to be served upon the parties on the attached list in the manner as indicated.
Cathy A. A
aJ2J
SWORN TO AND SUBSCRIBED before me this 3rd day of December , 2007.
otary Pu lie
, ARY
f\J(JTARY PUBLIC STATE OF DELAWARE
M~..
2011
393. 001- 18337.DOC
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Via First Class Mail
Libby Claimants, et at.
v. W. R. Grace & Co.,
et at.
(Counsel to W. R. Grace & Co. David M. Bernick , P.
et a/.
Civil Action No. 07- 609
District Court Appeal
Service List
Janet S. Baer , Esq. Lori Sinanyan , Esq. Kirkland & Ellis LLP 200 East Randolph Drive Chicago , IL 60601
Via Electronic Notification (Counsel to Debtors and Debtors in Possession)
Laura Davis Jones , Esq.
Via First Class Mail (Counsel to the Official Committee of
Asbestos Personal Injury Claimants) Peter Van N. Lockwood , Esq. Nathan D. Finch , Esq. Caplin & Drysdale , Chartered One Thomas Circle , N. Washington , DC 20005
James E. O' Neill , Esq. Pachulski Stang Ziehl & Jones LLP 919 North Market Street , 17th Floor
O. Box
8705
Wilmington , DE 19899
Via Electronic Notification (Counsel to the Official Committee of Asbestos Personal Injury Claimants)
Esq. Mark T. Hurford , Esq. Campbell & Levine , LLC
Marla Rosoff Eskin ,
Via First Class Mail (Counsel to the Official Committee of
Asbestos Personal Injury Claimants) Elihu Inselbuch , Esq. Caplin & Drysdale , Chartered 375 Park Avenue , 35th Floor New York, NY 10152- 3500
King Street, 3 rd Wilmington , DE 19801
800
Via Electronic Notification Evelyn J. Meltzer , Esq. Pepper Hamilton LLP
Suite 5100 13 13 Market Street 1709 PO Box Wilmington , DE 19899- 1709 (Counsel to BNSF Railway Company)
Via First Class Mail
Edward C. Toole , Jr. , Esq. Anne Marie Aaronson , Esq. Pepper Hamilton LLP Two Logan Square 3000 18th & Arch Streets Philadelphia , P A 19103 (Counsel to BNSF Railway Company)
Hercules Plaza ,
Via Electronic Notification (Counsel to the State of Montana) Francis A. Monaco , Jr. , Esq. Kevin J. Mangan , Esq. Womble Carlyle Sandridge & Rice , PLLC
222 Delaware Avenue , Suite Wilmington , DE 19801
1501
Via First Class Mail
(Counsel to the Libby Claimants) Daniel C. Cohn , Esq. Christopher M. Candon , Esq. Cohn & Whitesell LLP 101 Arch Street Boston , MA 02110