Free Appellant's Reply Brief - District Court of Delaware - Delaware

Case 1:07-cv-00609-RLB

Document 12

Filed 12/03/2007

Page 1 of 10

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

Document 12

Filed 12/03/2007

Page 2 of 10

TABLE OF CONTENTS
TABLE OF AUTHORITIES.......................................................................................................... ii
ARGUMENT ...................................................................................................................................

Case 1:07-cv-00609-RLB

Document 12

Filed 12/03/2007

Page 3 of 10

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 .........................................................................................................................

Case 1:07-cv-00609-RLB

Document 12

Filed 12/03/2007

Page 4 of 10

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.

Case 1:07-cv-00609-RLB

Document 12

Filed 12/03/2007

Page 5 of 10

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.

Case 1:07-cv-00609-RLB

Document 12

Filed 12/03/2007

Page 6 of 10

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.

Case 1:07-cv-00609-RLB

Document 12

Filed 12/03/2007

Page 7 of 10

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.

Case 1:07-cv-00609-RLB

Document 12

Filed 12/03/2007

Page 8 of 10

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

Case 1:07-cv-00609-RLB

Document 12

Filed 12/03/2007

Page 9 of 10

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).

Case 1:07-cv-00609-RLB

Document 12

Filed 12/03/2007

Page 10 of 10

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

Document 12-2

Filed 12/03/2007

Page 1 of 2

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

Case 1:07-cv-00609-RLB

Document 12-2

Filed 12/03/2007

Page 2 of 2

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