Opposition Brief — Official Committee of Tort v. Dow Corning Corp., 117 S. Ct. 718 (1997) (No. 96-330)

3) \3

Nos, 96-330 & 96-74:

Iu the Supreme Court of the iPptten ’

OcTOBER TERM, 1996 ae aS wee

OFFICIAL COMMITTEE OF TorT C Ss,

Petitioner, CLERK

Vv.

Dow CORNING CORPORATION, THE Dow CHEMICAL

COMPANY, CORNING INCORPORATED, BAXTER INTER-

NATIONAL INCORPORATED, MINNESOTA MINING AND

MANUFACTURING COMPANY, BRISTOL-MYERS SQUIBB

COMPANY AND MEDICAL ENGINEERING CORPORATION,

Respondents.

BREAST IMPLANT TORT CLAIMANTS REPRESENTED

BY O’QUINN, KERENSKY, MCANINCH

V.

Re

On Petitions for a Writ of Certio em:

United States Court of

for the Sixth Circuit

BRIEF IN OPPOSITION OF RESPONDENTS

BAXTER INTERNATIONAL INC. AND

BAXTER HEALTHCARE CORPORATION

THOMAS E. PirTts, JR. CARTER G. PHILLIPs *

SHELLEY C. CHAPMAN SIDLEY & AUSTIN

SIDLEY & AUSTIN 1722 Eye Street, N.W.

875 Third Avenue Washington, D.C. 20006

New York, NY 10022 (202) 736-8000

(212) 906-2000 LARRY J. NYHAN

JuDY O’ NEILL JAMES F. CONLAN

LAURA J. EISELE SIDLEY & AUSTIN

DYKEMA GOSSETT PLLC One First National Plaza

400 Renaissance Center Chicago, IL 60603

Detroit, MI 48248 (312) 853-7000

(318) 568-6800

Counsel for Respondents Baxter International Inc. and

Baxter Healthcare Corporation

November 27, 1996 * Counsel of Record

WILSON - Epes Printine Co., Inc. - 789-0086 - WasHIneToN, D.C. 20001

QUESTIONS PRESENTED

1. Whether the court below erred in finding “related

to” subject matter jurisdiction pursuant to 28 U.S.C.

§ 1334(b) over tort claims pending against Baxter that

were asserted jointly and severally against Baxter and a

Chapter 11 Debtor, Dow Corning Corporation, in pre-

bankruptcy tort actions.

2. Whether the court below erred in concluding that

28 U.S.C. § 157(b)(5) authorizes a district court in

which a Chapter 11 bankruptcy case is pending to trans-

fer civil actions “related to” the bankruptcy case, when

such actions allege a single cause of action against both

Baxter and Dow Corning Corporation.

(i)

ii

PARTIES TO THE PROCEEDINGS BELOW

In addition to the parties listed by petitioners, Baxter

Healthcare Corporation was a party to the proceedings

below.

iii

STATEMENT REQUIRED BY RULE 29.6

Respondent Baxter Healthcare Corporation is a wholly-

owned subsidiary of respondent Baxter International Inc.,

which is a publicly-owned corporation. Baxter Health-

care Corporation has no non-wholly owned subsidiaries.

The non-wholly owned subsidiaries of Baxter International

Inc. are Baxter S.A. (Belgium); Baxter S.A. (France);

Baxter Healthcare (Holdings) Ltd. (U.K.); Baxter

Healthcare Limited (U.K.); Baxter World Trade S.A.

(Belgium); Baxter Healthcare Pty. Ltd. (Australia); Bax-

ter A.G. (Switzerland); and Baxter S.A. de C.V.

(Mexico).

TABLE OF CONTENTS

QUESTIONS PRESENTED

PARTIES TO THE PROCEEDING BELOW ........_.

STATEMENT REQUIRED BY RULE 29.6...

TABLE OF AUTHORITIES oc ccccccceoos-s

OPTNTORG DW ssc esi ei

REASONS FOR DENYING THE PETITIONS ....._.

I.

II.

ITT.

CERTIORARI SHOULD BE DENIED BE-

CAUSE THIS CASE PRESENTS NO ISSUE

THAT IS RIPE FOR THIS COURT’S CONSID-

PE Martine Ge

CERTIORARI SHOULD BE DENIED BE-

CAUSE THE COURT BELOW CORRECTLY

APPLIED SETTLED LAW IN A DECISION

THAT DOES NOT CONFLICT WITH THE

DECISIONS OF THIS COURT OR OF ANY

OTHER COURT OF APPEALS...

CONTRARY TO PETITIONERS’ ASSERTION,

THE SIXTH CIRCUIT WAS ENTIRELY COR-

RECT IN ITS READING OF 28 U.S.C. § 157

CI) CD Stes Aine t ening a

IV. THE PETITIONS PRESENT NO ISSUE OF

“DOCTRINAL SIGNIFICANCE” THAT WAR-

RANTS REVIEW BY THIS COURT...

sce ec ch COE EE VN SE SES

FAE'S TRINAP EMD ie ig ee

]

Ls)

15

17

19

la

vi

TABLE OF AUTHORITIES

CASES Page

8300 Newburgh Road Partnership v. Time Con-

struction, Inc. (In re Time Construction, Inc.),

43 F.3d 1041 (6th Cir. 1995) ..........-.220.2 11

A.H. Robins Co., Inc. v. Piccinin (In re A.H.

Robins Co., Inc.), 788 F.2d 994 (4th Cir.), cert.

denied, 479 U.S. 876 (1986) ............2.002.220.....--0-- 16

American Construction Co. v. Jacksonville, T. & K.

fe ee Mel Rk By: | rem n 6

American Hardwoods, Inc. v. Deutsche Credit Corp.

(In re American Hardwoods, Inc.), 885 F.2d 621

COGR CAP: DD sien net kee 10

Brotherhood of Locomotive Firemen & Enginemen

v. Bangor & A. R.R. Co., 389 U.S. 327 (1967)... 6

Calumet National Bank v. Levine (In re Levine),

pb WOR See ges A.” Me, 5 Pe Antntiemten 16

In re Celotex Corp., 140 B.R. 912 (Bankr. M.D.

|g Rs —_y MesieRerecaleem iene eh celle bits eR ie cai eee Q

Celotex Corp. v. Edwards, 115 S. Ct. 1493 (1995) ..passim

Coker v. Pan American World Airways, Inc. (In

re Pan American Corp.), 950 F.2d 839 (2d Cir.

1008) (24) AU ae es 16

In re Fedpack Systems, Inc., 80 F.3d 207 (7th Cir.

000) .03-. a aee a 14

Hamilton-Brown Shoe Co. v. Wolf Bros. & Co., 240

U.S. 251 (1916) ............ sesibilapaahicch insaindiiaie deine ti ei, 6, 7

Indianapolis v. Chase National Bank, 314 U.S. 63

EC RANAA,) visasteniteioeine “ahsignstcateiadnas demndomaaataianicoaia as 7

Kelley v. Nodine (In re Salem Mortgage Co.), 783

PAE OOS COG Cr. SOD werner ccs 10

MacArthur Co. v. Johns-Manville Corp. (In re

Johns-Manville Corp.), 887 F.2d 89 (2d Cir.),

cert. denied, 488 U.S. 868 (1988) —......0.- 10

In re Marcus Hook Development Park, Inc., 948

me & ' Ge ge SB. i) Reem eerbeNS Lys! 11, 12, 18

Mercer v. Theriot, 377 U.S. 152 (1964) —....00000000.... 7

Michigan Employment Security Commission v.

Wolverine Radio Co. (In re Wolverine Radio

Co.), 930 F.2d 11382 (6th Cir. 1991), cert. dis-

missed, 508 U.S. 978 (1992) ............. cee eee 1l

vii

TABLE OF AUTHORITIES—Continued

Miller v. Kemira (In re Lemco Gypsum, Inc.), 910

wae ee Clits Cle, 1900) 13, 18

Murray v. Pan American World Airways, Inc. (In

re Pan Am Corp.), 16 F.8d 518 (2d Cir. 1994)... 16

Oberg v. Aetna Casualty & Surety Co. (In re A.H.

Robins Co.), 828 F.2d 1023 (4th Cir. 1987),

cert. denied, 485 U.S. 969 (1988) ......000.. 10

Pacor, Inc. v. Higgins, 743 F.2d 984 (1984) ............ 11

Robinson v. Michigan Consolidated Gas Co., 918

Fame Ore (Ge Cae 200) oo 11

Sanders Confectionery Products, Inc. v. Heller

Financial, Inc., 973 F.2d 474 (6th Cir. 1992),

cert. denied, 506 U.S. 1079 (19938)... 11

Scott v. United States, 486 U.S. 128 (1978) .......... 7

The Monrosa v. Carbon Black Export, Inc., 359

Boies SU CR ia ike cn paienicrceiis. 6

Torkelsen v. Maggio (In re Guild and Gallery

Plus, Inc.), 72 F.3d 1171 (3d Cir. 1996)... 13

In re Turner, 724 F.2d 388 (2d Cir. 1983) 13

Wood v. Wood (In re Wood), 825 F.2d 90 (5th Cir.

Ne eatin lidiansiatand nave detalaak seat iuiiin see siopis 18

STATUTES

im I sa 5, 15

Ir Nt I 4, 15, 16, 17

Ba Pam ND ii cia atin incipient naps asks vcines passim

Se a MND ihctataitarscctaacadctkice ek heck 2, 5,17

i RN pahtchtien one cS Nee PCERR OS 15

Ju the Supreme Court of the United States

OCTOBER TERM, 1996

No. 96-330

OFFICIAL COMMITTEE OF ToRT CLAIMANTS,

e: Petitioner,

Dow CORNING CORPORATION, THE Dow CHEMICAL

COMPANY, CORNING INCORPORATED, BAXTER INTER-

NATIONAL INCORPORATED, MINNESOTA MINING AND

MANUFACTURING COMPANY, BRISTOL-MYERS SQUIBB

COMPANY AND MEDICAL ENGINEERING CORPORATION,

Respondents.

No. 96-742

BREAST IMPLANT TORT CLAIMANTS REPRESENTED

BY O’QUINN, KERENSKY, MCANINCH & LAMINACK,

- Petitioners,

Dow CorRNING CoRPORATION, et al.,

Respondents.

On Petitions for a Writ of Certiorari to the

United States Court of Appeals

for the Sixth Circuit

BRIEF IN OPPOSITION OF RESPONDENTS

BAXTER INTERNATIONAL INC. AND

BAXTER HEALTHCARE CORPORATION

Se ee eee eT

2

Baxter International Inc. and Baxter Healthcare Corpo-

ration (collectively, “Baxter”) hereby oppose the peti-

tions for a writ of certiorari filed by the Official Com-

mittee of Tort Claimants (the “Committee Petition”) and

by the breast implant tort claimants represented by

O’Quinn, Kerensky, McAninch & Laminack (the

“O’Quinn Petition”, and, together, the “Petitions”). The

merits of this case involve the application of the provisions

of a discrete jurisdictiona: statute to the facts of a mass

tort litigation in which Baxter, among others, and a Chap-

ter 11 debtor, Dow Corning Corporation, are defendants.

Given the procedural posture of the case, the questions

presented are not ripe for this Court’s consideration, and

the Petitions should be denied on that basis alone. Even

if the merits were ripe for consideration, however, the

questions presented are not worthy of this Court’s atten-

tion. The decision below is not at odds with any decision

of any court of appeals, and is entirely consistent with this

Court’s recent decision in Celotex Corp. v. Edwards, 115

S. Ct. 1493 (1995). Accordingly, the Petitions should be

denied.

OPINIONS BELOW

In addition to the opinions cited by petitioners, the

opinions below include the opinion issued on July 30,

1996 by the district court, in which that court, pursuant

to 28 U.S.C. § 1334(c), declined to exercise jurisdiction

over the claims against Baxter and the other nondebtor

co-defendents, which the Sixth Circuit had held to be

“related to” the Debtor’s bankruptcy. This opinion is

reprinted at Resp. App. la-8a.

STATEMENT OF THE CASE

Petitioners load their statements of the case with “facts”

that are both highly disputed and immaterial to the issues

presented by the decision below. Baxter will not burden

the Court with a point-by-point response, but will instead

confine its statement to material facts relevant to the

questions presented for the Court’s consideration.

errr

3

1. Breast implants containing silicone have been on

the market for more than 30 years. Originally designed

by plastic surgeons in cooperation with Dow Corning

Corporation (“Dow Corning” or the “Debtor”), these

devices were believed to be superior in their cosmetic and

reconstructive uses to implants made of other sub-

stances. By most accounts, the Debtor manufactured at

least one-half of the silicone gel-filled implants sold during

that period. The balance were manufactured by other

companies including 3M (or its affiliates), Bristol-Myers

(or its affiliates), and Heyer-Schulte, the manufacturer

whose products are the cause of Baxter’s involvement in

this dispute (collectively, the “Co-defendants”).’ The

Debtor was also the source of much of the silicone gel

used in implants manufactured by other companies, in-

cluding more than 90 percent of the implants sold by

Heyer-Schulte. Moreover, every single implant manu-

factured by Heyer-Schulte had at least one silicone com-

ponent manufactured by the Debtor.

Because the Debtor itself manufactured massive num-

bers of implants and was a principal supplier of the sili-

cone used by these other implant makers, the Debtor and

its affiliates were routinely named as co-defendants in law-

suits involving implants manufactured by others. By the

date of the Debtor’s Chapter 11 petition, tens of thousands

of suits involving silicone breast implants had been

brought in the United States. The actions in which both

the Debtor and Baxter are defendants number more than

5,000, involving more than 14,000 plaintiffs. In most of

these actions, the Debtor and Baxter are alleged to be

? Baxter has never designed, manufactured, or marketed breast

implants. Baxter is a defendant in these cases only because Baxter

is, as a consequence of a series of corporate acquisiticns and

mergers, responsible for certain liabilities of Heyer-Schulte, the

entity that manufactured the implants. Accordingly, the name

“Heyer-Schulte” is used where appropriate in this opposition.

4

joint tortfeasors and jointly and severally liable for the

damages asserted.

Indeed, every plaintiff who has sued both the Debtor

and Baxter on account of silicone breast implants alleges

that she suffers from one or more diseases caused by sili-

cone, and that silicone was introduced into her body by

both companies in one of two ways—either the plaintiff

underwent multiple implants with devices manufactured

and sold by both the Debtor and Heyer-Schulte, or the

plaintiff received Heyer-Schulte implants containing sili-

cone gel (or other components) manufactured by the

Debtor. Thus, each plaintiff alleges a single set of symp-

toms, a single chemical agent of disease, and a single

cause of action involving two defendants—two defendants

whose responsibility for those symptoms and that disease

is, from each plaintiff’s perspective, unitary. This describes

the thousands of cases in which Baxter and the Debtor are

co-defendants that were the subject of the motion filed

by Baxter in the district court pursuant to 28 U.S.C.

§ 157(b)(5); similar motions were filed by 3M and

Bristol Meyers (collectively, the “Co-defendant Motions”).

2. The Co-defendant Motions asked the district court

to exercise its jurisdiction under 28 U.S.C. § 1334(b) and

to exercise its power under 28 U.S.C. § 157(b)(5) to

order that the personal injury tort and wrongful death

claims “be tried in the district court in which the bank-

ruptcy case is pending, or in the district court in which

the claim arose, as determined by the district court in which

the bankruptcy case is pending.” 28 U.S.C. § 157(b)(5).

On September 12, 1995, the district court denied transfer

of the claims covered by the Co-defendant Motions on

the ground that it lacked subject matter jurisdiction over

the tort actions. Committee Pet. App. at 57a-64a.

On appeal, the court of appeals was required to decide

whether the billions of dollars in lawsuits against Baxter

and the other Co-defendants, with the attendant billions

of dollars in contribution claims against the Debtor by

the Co-defendants, could conceivably have an effect on

5

the administration of the Debtor’s estate. The Sixth Cir-

cuit decided that, under well-established and non-contro-

versial legal principles, the lawsuits could have such

an effect and, accordingly, held that “related to” jurisdic-

tion under 28 U.S.C. § 1334(b) exists with respect to

these personal injury claims. Committee Pet. App. at

la-28a. :

The Sixth Circuit further concluded that 28 U.S.C.

§ 157(b)(5) permits the district court to fix the trial

venue of all breast implant cases pending against Baxter

and the other Co-defendants that are “related to” the

Debtor’s bankruptcy proceeding. Committee Pet. App. at

23a-26a. The court of appeals then remanded the case to

the district court to determine “whether the abstention ex-

ception in Section 157(b)(4) applies to claims pending

against nondebtor defendants and, if not, whether the

factors calling for mandatory exemption [sic] under Sec-

tion 1334(c)(2) have been met.” Committee Pet. App.

at 28a. The district court was also directed to address

the issue of discretionary abstention under 28 U.S.C.

§ 1334(c)(1). Id.

3. On July 30, 1996, the district court on remand

ruled that all of the personal injury actions against all of

the Co-defendants were subject to mandatory abstention

under 28 U.S.C. § 1334(c)(2) and, in the alternative,

exercised its discretion to abstain from hearing those ac-

tions pursuant to 28 U.S.C. § 1334(c)(1 ). Resp. App. at

la-8a. Baxter and the other Co-defendants have appealed

the abstention order to the Sixth Circuit, which has ex-

pedited review, notwithstanding petitioners’ attempt to

have such appeals dismissed. Thus, as this opposition

brief is being submitted to this Court, this case is awaiting

a second Sixth Circuit decision. Although a successful ap-

peal by the Debtor or the Co-defendants could potentially

make this issue ripe—although certainly not worthy of

certiorari—the procedural posture of the action below

makes review of these petitions premature. The district

court is not currently exercising jurisdiction over any of

the claims that are covered by the Co-defendant Motions,

6

and not a single case against the Co-defendants has been

transferred to the district court.

REASONS FOR DENYING THE PETITIONS

I. CERTIORARI SHOULD BE DENIED BECAUSE

THIS CASE PRESENTS NO ISSUE THAT IS RIPE

FOR THIS COURT'S CONSIDERATION.

As this Court noted long ago, “[wJhile this Court decides

questions of public importance, it decides them in the con-

text of meaningful litigation.” The Monrosa v. Carbon

Black Export, Inc., 359 U.S. 180, 184 (1959). That con-

text is wholly absent here. See also Brotherhood of Loco-

motive Firemen & Enginemen v. Bangor & A. R.R. Co.,

389 U.S. 327, 328 (1967) (“because the Court of Appeals

remanded the case, it is not yet ripe for review by this

Court”); Hamilton-Brown Shoe Co. v. Wolf Bros. & Co.,

240 U.S. 251, 258 (1916); American Construction Co. v.

Jacksonville, T. & K. W. R. Co., 148 U.S. 372, 384

(1893).

Indeed, petitioner Tort Committee recognizes this

problem, acknowledging that, at least for now, the dis-

trict court’s decision to abstain stands. Undaunted, how-

ever, petitioner Tort Committee argues that “the general

significance of what the Sixth Circuit has held remains

unimpaired” and that the “sweeping dimensions of ‘related

to’ jurisdiction as defined by the Sixth Circuit may be

counted on to serve the visible purpose of both blocking

state litigation and transferring it from the court in which

plaintiffs have exercised their right to proceed.” Com-

mittee Pet. at 11-12.

Petitioners’ invitation to the Court to issue a sweeping

advisory opinion should be declined. If the Sixth Circuit

were to reverse the July 30 district court order and if,

upon remand, the district court were to exercise jurisdic-

tion over the claims against Baxter and the other Co-

defendants, petitioners would be free to present their argu-

7

ments anew in a second petition for certiorari. It is well

established that this Court may reach back and decide

“all of the substantial federal questions determined in the

earlier stages of the litigation.” Mercer v. Theriot, 377

U.S. 152, 153 (1964) (quoting Reece v. Georgia, 350

U.S. 85, 87 (1955)); see also Scott v. United States, 436

U.S. 128 (1978) (same); Indianapolis v. Chase National

Bank, 314 U.S. 63 (1941) (same); Hamilton-Brown Shoe

Co., 240 U.S. at 257 (same). Granting the Petitions at

this stage of the litigation would be a waste of this Court's

limited resources.”

Il. CERTIORARI SHOULD BE DENIED BECAUSE

THE COURT BELOW CORRECTLY APPLIED SET-

TLED LAW IN A DECISION THAT DOES NOT

CONFLICT WITH THE DECISIONS OF THIS

COURT OR OF ANY OTHER COURT OF APPEALS.

Petitioner Tort Committee asserts that the opinion

issued by the Sixth Circuit “represents an unprecedented

expansion of bankruptcy jurisdiction.” Committee Pet.

at 4. It does not. As a review of the substantial prece-

dent interpreting 28 U.S.C. § 1334(b) makes quite clear,

virtually all of the courts of appeals, and this Court,

have articulated the same standard for determining

whether a bankruptcy court or district court has juris-

diction over a case that is “related to” 2 case under

Chapter 11. The Sixth Circuit’s opinion is neither un-

precedented nor is it any jurisdictional expansion at all;

in fact, the approach of the Sixth Circuit to determining

whether a proceeding is “related to” a Chapter 11 case is

thoroughly conservative.

*The argument made in the O’Quinn Petition, that mootness

should not preclude review at this juncture because the issue at

bar is “capable of repetition yet evading review,” O’Quinn Pet. at

2. n.2, is sorely misplaced. This Court’s opinion in Celoter makes

clear that this issue is not capable of evading review.

8

Only last term, in Celotex Corp. v. Edwards, 115 S. Ct.

1493 (1995), this Court construed Section 1334(b) sub-

ject matter jurisdiction broadly, citing with approval the

numerous decisions of courts of appeals that have held

that a case is “related to” a Chapter 11 case if its out-

come could “conceivably have any effect on the estate

being administered in bankruptcy.” Jd. at 1499 n.6 (citing

Pacor, Inc. v. Higgins, 743 F.2d 984, 994 (3d Cir. 1984)).

Indeed, this Court noted that in crafting Section 1334,

Congress broke with narrower, past jurisdictional grants to

bestow broad and comprehensive, though certainly not

limitless, jurisdiction on bankruptcy courts. Celotex, 115

S. Ct. at 1499.

A careful reading of Celotex is itself sufficient to de-

feat petitioners’ argument. In Celotex, this Court ex-

plicitly adopted the Third Circuit’s conclusion in Pacor

that “Congress intended to grant comprehensive jurisdic-

tion to the bankruptcy courts so that they might deal

efficiently and expeditiously with all matters connected

with the bankruptcy estate,” along with its rather obvious

caution that “ ‘related to’ jurisdiction cannot be limitless.”

Celotex, 115 S. Ct. at 1499 (citing Pacor, 743 F.2d at

994). While the Court did not explicitly endorse the

“conceivable effect” test (or any other test for that mat-

ter) for “related to” jurisdiction adopted by virtually

every circuit, it did cite with approval the leading bank-

ruptcy treatise that was the source of the “any effect” or

“conceivably have any effect” standard. Celotex, 115

S. Ct at 1498-99 n.5 (citing 1 Collier on Bankruptcy

¢ 3.01[1][c]liv] at 3-28 to 3-29 (15th ed. 1995)). And

this Court did point out that the “conceivable effect” test

is the law in nine of the eleven circuits that have spoken

on the issue. /d. at 1499 n.6.*

8 As will be discussed below, this Court did not find that the

circuits were split on this issue. Rather, it noted that two of the

circuits (the Sixth not among them) have adopted a “slightly

different test.” 115 S. Ct. at 1499 n.6. Under any formulation of

the test, the claims in these cases are unquestionably “related.”

a

.

9

Moreover, the Court did not endorse the Third Circuit's

somewhat restrictive application of the “conceivable effect”

test in Pacor. In essence, the Court held that under any

relevant test, the injunction in Celotex fell within the

“related to” jurisdiction of the bankruptcy court. The

same is true of the ruling here.

There is much in Celotex that supports the approach

employed by the Sixth Circuit. In deciding not to dis-

solve the injunction against certain non-debtor third par-

ties, the bankruptcy court in Celotex made the following

findings:

[I]f the Section 105 stay were lifted to enable the

judgment creditors to reach the sureties, the sureties

in turn would seek to lift the Section 105 stay to

reach Debtor’s collateral, with corresponding actions

by Debtor to preserve its rights under the settlement

agreements. Such a scenario could completely de-

stroy any chance of resolving the prolonged insur-

ance coverage disputes currently being adjudicated

in this Court. The settlement of the insurance cov-

erage disputes with all of Debtor’s insurers may well

be the linchpin of Debtor’s formulation of a feasible

plan. Absent the confirmation of a feasible plan,

Debtor may be liquidated or cease to exist after a

ec feast by the victors in a race to the court-

ouse.

In re Celotex Corp., 140 B.R. 912, 915 (Bankr. M.D.

Fla. 1992), quoted in Celotex, 115 S. Ct. at 1500. This

Court’s repetition of such a chain of “conceivable effects”

as supporting its jurisdictional conclusion in Celotex is

striking. And its reason for this reference was to drive

home a fundamental, long-standing point about bank-

ruptcy jurisdiction:

In light of these findings by the Bankruptcy Court, it

is relevant to note that we are dealing here with a

reorganization under Chapter 11, rather than a liqui-

dation under Chapter 7. The jurisdiction of bank-

10

ruptcy courts may extend more broadly in the former

case than in the latter. Cf. Continental Illinois Nat.

Bank & Trust Co. v. Chicago, RI. & P.R. Co., 294

U.S. 648, 676, 79 L. Ed. 1110, 55 S. Ct. 595, 606

(1935).

Celotex, 115 S. Ct. at 1500.

The Court noted that its holding “is in accord with

representative recent decisions of the Courts of Appeals.”

Celotex, 115 S. Ct. at 1500. It then listed three decisions

_ that epitomize the practical approach to jurisdiction that

the Sixth Circuit has followed for over a decade. Ameri-

can Hardwoods, Inc. v. Deutsche Credit Corp. (In re

American Hardwoods, Inc.), 885 F.2d 621, 624 (9th Cir.

1989); MacArthur Co. v. Johns-Manville Corp. (In re

Johns-Manville Corp.), 837 F.2d 89 (2d Cir.), cert. de-

nied, 488 U.S. 868 (1988); Oberg v. Aetna Casualty &

Surety Co. (In re A.H. Robins Co.), 828 F.2d 1023 (4th

Cir. 1987), cert. denied, 485 U.S. 969 (1988). Each of

these cases involved the exercise of bankruptcy jurisdic-

tion over claims between non-debtors, and each of these

cases was resolved by determining whether substantive pro-

visions of the Bankruptcy Code authorized or prohibited

the relief sought. “Related to” jurisdiction, if discussed

at all, was upheld summarily.

The decision below follows longstanding Sixth Circuit

precedent. For over a decade, the Sixth Circuit has con-

sistently held that where the facts of a case suggest that

the potential for contribution claims against the debtor is

real and there is therefore a genuine likelihood that tort

actions could have an impact on the debtor’s estate, the

underlying tort actions that originally named the debtor

as a co-defendant are “related to” the bankruptcy case.

Moreover, the Sixth Circuit, for years, has consistently

applied the holding that automatic debtor liability is not

a prerequisite to “related to” jurisdiction. See Kelley v.

Nodine (In re Salem Mortgage Co.), 783 F.2d 626 (6th

Cir. 1986) (upholding “related to” jurisdiction despite

11

absence of automatic debtor liability); Robinson v. Michi-

gan Consolidated Gas Co., 918 F.2d 579 (6th Cir. 1990)

(same); Michigan Employment Security Commission v.

Wolverine Radio Co. (In re Wolverine Radio Co.), 930

F.2d 1132 (6th Cir. 1991), cert. dismissed, 503 U.S. 978

(1992) (same); Sanders Confectionery Products, Inc. v.

Heller Financial, Inc., 973 F.2d 474 (6th Cir. 1992),

cert. denied, 506 U.S. 1079 (1993) (same); 8300 New-

burgh Road Partnership v. Time Construction, Inc. (In re

Time Construction, Inc.), 43 F.3d 1041 (6th Cir. 1995)

(per curiam) (similar conclusion in dicta).

Furthermore, there simply is no circuit split on this

issue. To attempt to create a split with the Sixth Circuit,

petitioners allege a “direct conflict” (Committee Pet. at 9,

O’Quinn Pet. at 8-10) with the Third Circuit’s holding in

Pacor, Inc. v. Higgins, 743 F.2d 984 (1984). This Court

found no such split last year, when it noted in Celotex

that eight circuits had adopted the Pacor “any conceivable

effect” test with “little or no variation,” and that two

circuits “seem to have adopted a slightly different test.”

Celotex, 115 S. Ct. at 1499 n.6. Even more importantly,

this Court cited the Sixth Circuit’s decision in Salem

Mortgage—which applied the exact same rule of law as

did the opinion below—as one of the many circuit opin-

ions that had followed the approved portion of Pacor

with little or no variation.

Indeed, it is evident from opinions rendered after Pacor,

that the Third Circuit perceives no conflict with its sister

circuits and has retreated from the very narrow facet of

Pacor upon which the Tort Committee places total reliance,

i.e., that a claim against a third party must “automatically”

create liability against the debtor to fall within the court’s

“related to” jurisdiction.* Thus, in Im re Marcus Hook

*It is also important to note that the Sixth Circuit below, apply-

ing the approach that has pervaded its analysis and the analysis of

12

Development Park, Inc., 943 F.2d 261 (3d Cir. 1991),

the Third Circuit held that “related to” jurisdiction existed

over an action between two third parties relating to prop-

erty that had once been part of the debtor’s estate, even

though there was no certainty that resolution of the dispute

would have any impact on the debtor’s estate. Construing

the very statutory subsection at issue here, the Third Cir-

cuit repeatedly quoted from and relied upon decisions from

the Fifth and Sixth Circuits, including Salem:

A proceeding is related to bankruptcy if “the out-

come of that proceeding could conceivably have any

effect on the estate being administered in bankruptcy,”

Pacor, Inc. v. Higgins, 743 F.2d 984, 994 (3d Cir.

1984) (emphasis in original). Accord In re Fietz,

825 F.2d 455, 457 (9th Cir. 1988); Matter of Wood,

825 F.2d at 93 [Sth Cir. 1987]; In re Dogpatch

U.S.A., Inc., 810 F.2d 782, 786 (8th Cir. 1987);

In re A.H. Robins Co., Inc., 788 F.2d 994, 1002

n.11 (4th Cir.), cert. denied, 479 U.S. 876, 107 S.

Ct. 251, 93 L. Ed.2d 177 (1986); In re Salem

Mortgage Co., 783 F.2d 626, 634 (6th Cir. 1986).

A key word in this test is “conceivable.” Certainty,

or even likelihood, is not a requirement. In re

Wolverine Radio Co., 930 F.2d at 1143 [6th Cir.

1991]. Bankruptcy jurisdiction will exist so long as

other circuit courts for over a decade, indicated that the facts before

it distinguished this case from Pacor. The Sixth Circuit held that:

[T]here is a qualitative difference between the single suit in-

volved 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 contribu-

tion 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. Cognizant of the

fact that “related to” jurisdiction cannot be limitless and con-

cerned about granting benefits of the automatic stay in bank-

ruptcy to solvent co-defendants, we nevertheless believe the pos-

sibility of contribution or indemnification liability in this case

is far from attenuated.

Committee Pet. App. at 20-21a.

13

it is possible that a proceedin g may impact on “the

debtor’s rights, liabilities, options, or freedom of ac-

tion” or the “handling and administration of the

bankrupt estate.” In re Smith, 866 F.2d 576, 580

(3d Cir. 1989). Accord Pacor, Inc. v. Higgins, 743

F.2d at 994.

943 F.2d at 264 (emphasis in original, bracketed notations

supplied). Accordingly, even if the Third Circuit may

have started out in a slightly different position as to how

the “related to” standard applies, subsequent rulings of

that court make clear that it views its position as in accord

with the other circuits.’ See also Torkelsen v. Maggio (In

re Guild and Gallery Plus, Inc.), 72 F.3d 1171, 1181

(3d Cir. 1996) (applying Marcus Hook holding). There

® The argument of the O’Quinn Petitioners, that the opinion below

splits with the Second and Eleventh Circuits, borders on frivolous.

The Eleventh Circuit correctly noted that the decision in Salem

Mortgage—in a specific holding that was directly quoted and re-

affirmed in the opinion below—was among the more conservative

opinions on the issue of “related to” jurisdiction, because it required

that the connection to the estate not be overly remote. See Miller

v. Kemira (In re Lemco Gypsum, Inc.), 910 F.2d 784, 788 (11th Cir.

1990) (citing Salem approvingly and noting Sixth Circuit’s con-

servative requirement that possibility of effect on estate not be

remote). In the opinion below, the Sixth Circuit, citing Salem,

again reaffirmed that “ ‘situations may arise where an extremely

tenuous connection to the estate would not satisfy the jurisdictional

requirement’ of Section 1334(b).” Committee Pet. App. at 10a

(citing Robinson v. Michigan Consolidated Gas Co., Inc., 918 F.2d

579, 584 (6th Cir. 1990), citing Salem Mortgage, 788 F.2d at 634).

Like this Court, the Sixth Circuit has repeatedly made clear that

“related to” jurisdiction is not limitless.

The contention of a split with the Second Circuit is equally mis-

guided. The O’Quinn Petition alleges a split with the Second Cir-

cuit based on one line in Jn re Turner, 724 F.2d 338 (2d Cir. 1988),

in which that court noted that a “significant connection” to the

estate was lacking in the case before it. In addition to the fact

that this Court cited the Turner opinion in Celoter and found no

split, there is simply no divergence between the Turner holding

and that of the Sixth Circuit.

14

is simply no existing circuit conflict warranting this

Court’s review.°

Petitioners present no basis for disturbing the Sixth

Circuit’s application of well-settled precedent to the facts

of this mass tort bankruptcy. The claims of the tort plain-

tiffs against Baxter are at least as closely “related to” the

Debtor’s bankruptcy as the claims of numerous entities as

to whom jurisdiction was upheld in cases cited without

objection by this Court in Celotex.

Baxter is a co-defendant with the Debtor in single

causes of action that, in the aggregate, were the cause of

the Debtor’s resort to Chapter 11. It is a co-defendant,

either because a plaintiff received multiple implants manu-

factured by both Heyer-Schulte and the Debtor, or be-

cause—if a Heyer-Schulte implant alone was at issue—

every single implant ever made by Heyer-Schulte contained

a silicone component manufactured by the Debtor. As a

Co-defendant, Baxter has contingent, unliquidated claims

for contribution and indemnity the size of which will be

determined exclusively by the success of the plaintiffs’

claims against Baxter. Moreover, as a party potentially

co-liable with the Debtor, Baxter has the right to file, and

intends timely to file, claims in the bankruptcy case for

every Claimant who asserts claims against Baxter for which

* Respondents recognize that the Seventh Circuit, citing no judi-

cial precedent but its own, has applied a slightly more restrictive

inquiry. See In re Fedpack Systems, Inc., 80 F.3d 207 (7th Cir.

1996). Seemingly defensive about its decision not to follow the

otherwise universal “conceivable effect” standard, that circuit court

noted that “[wJhile the United States Supreme Court appears to

favor a broad interpretation, it has not mandated such an ap-

proach.” Id. at 218. The Seventh Circuit’s somewhat more conserva-

tive variation of the Pacor test scarcely constitutes a split with its

sisters. In any event, that the Seventh Circuit might apply a

“slightly different test” Celotez, supra, 115 S. Ct. at 1499 n.16, is

surely no reason to grant certiorari on a centrist opinion issued by

the Sixth Circuit and on facts that would readily satisfy the

Seventh Circuit standard.

15

the Debtor may be co-liable. 11 U.S.C. § 501(b); Fed.

R. Bankr. P. 3005. Indeed, Baxter has already filed over

13,000 such claims in the Debtor’s bankruptcy proceedings.

Although acknowledging that billions of dollars are at

stake, petitioners nevertheless maintain that it is a “flight

of advocates’ fancy” (Committee Pet. at 18) to assume

that any of the Co-defendants would seek indemnity or

contribution from the company that was both the domi-

nant manufacturer of breast implants and the prircipal

supplier of raw materials used by other manufacturers

in the production of breast implants. If a flight of fancy

is anywhere to be found, it is in this contention. Baxter

fully intends timely to file all proofs of claim necessary

to preserve its legal rights against the Debtor.

Indeed, the repeated assertions in the Petitions that the

Co-defendants have not yet filed contribution and indem-

nity claims—from which the petitioners ask this Court

to draw various conclusions—are of no moment. The

deadline for filing such claims is January 15, 1997. As

Baxter has told every court and every attorney in this

case from its inception, Baxter will file the claims neces-

Sary to preserve its rights by that date. Furthermore, it is

ironic that the same plaintiffs who filed complaints assert-

ing joint and several liability against Baxter and the Deb-

tor now assert that there is no conceivable connection be-

tween their cases against Baxter and their cases against

the Debtor—cases severed only because of the Debtor’s

intervening bankruptcy filing.

If, CONTRARY TO PETITIONERS’ ASSERTION, THE

SIXTH CIRCUIT WAS ENTIRELY CORRECT IN

ITS READING OF 28 U.S.C. § 157(b)(5).

Petitioners also argue that the court below erred in

holding that 28 U.S.C. § 157(b)(5) allows a district

court to fix the trial venue of breast implant cases pend-

ing against Baxter and other Co-defendants that are “re-

lated to” the Debtor’s bankruptcy proceedings pursuant

to Section 1334(b). The Sixth Circuit’s holding, argue

16

petitioners, is not only a “misreading” of the statute but

also a threat to “the balance struck by Congress in setting

forth the powers of courts sitting in bankruptcy.” Com-

mittee Pet. at 19; O’Quinn Pet. at 17. On the contrary,

the holding of the Sixth Circuit is based squarely on the

only logical reading of the text of the statute, is consistent

with the few cases that have interpreted it, and unques-

tionably promotes the statute's “oft-stated goal of central-

izing the administration of a bankruptcy estate.” Com-

mittee Pet. App. at 26a.

Petitioners’ argument is based on words not found in

the statute rather than on the language of the statute itself.

First, petitioners note that the word “transfer” does not

appear in the text of § 157(b)(5), and from this conclude

American World Airways, Inc. (In re Pan Am Corp.), 16

F.3d 513 (2d Cir. 1994); Coker v. Pan American World

Airways, Inc. (In re Pan American Corp.), 950 F.2d 839

(2d Cir. 1991); A.A. Robins Co., Inc. v. Piccinin (In re

A.H. Robins Co., Inc.), 788 F.2d 994 (4th Cir.), cert.

denied, 479 U.S. 876 (1986); Calumet National Bank v.

er ae

17

omitted). Transfer is the only efficient means by which to

accomplish these goals.

Recognizing the enormous implications to any Dow

Corning reorganization posed by the thousands of poten-

tial contribution and indemnity claims held by the Co-

defendants, the Sixth Circuit fully embraced the Fourth

Circuit’s reasoning in A.H. Robins that, especially in the

context of a mass tort case, the centralization of all per-

sonal injury claims “increases the debtor's odds of devel-

oping a reasonable plan of reorganization which will ‘work

a rehabilitation of the debtor and at the same time assure

fair and non-preferential resolution of the . . . claims.’” |

Committee Pet. App. at 24a, citing A.H. Robins, 788 F.2d )

at 1011. Petitioners offer no reason, compelling or other-

wise, to disturb the Sixth Circuit’s correct application of

§ 157(b) (5) to the facts of this case.

IV. THE PETITIONS PRESENT NO ISSUE OF “DOC-

TRINAL SIGNIFICANCE” THAT WARRANTS RE-

VIEW BY THIS COURT.

The issue of national importance purportedly raised by .

petitioners is that under the rule of law applied by the )

Sixth Circuit here, legions of tort claims that should prop- .

erly be prosecuted in state courts will now improperly be

placed in the “deep freeze” of bankruptcy. A review of |

the statutory structure and of the subsequent events on

remand in this case make clear that this alleged concern

18

[t]he abstention visions of 28 U.S.C. § 1334(c)

qualify Section 1334(b)’s broad grant of jurisdiction.

It is for the district court to “determine in each in-

dividual case whether hearing it would promote or

impair efficient and fair adjudication of bankruptcy

cases.”

Committee Pet. App. at 27a (citing Salem, supra).*

In sum, petitioners’ policy concerns are as exaggerated

as their legal issues are premature. Accordingly, the Court

should decline to review this case.

8 See also Wood v. Wood (In re Wood), 825 F.2d 90, 98 (5th Cir.

1987) (“the abstention provisions of the Act demonstrate the

intent of Congress that concerns of comity and judicial convenience

should be met, not by rigid limitations on the jurisdiction of federal

courts, but by the discretionary exercise of abstention when appro-

priate in a particular case) ; Miller v. Kemira (In re Lemco Gypsum,

Inc.), 910 F.2d 784, 788 n.16 (llth Cir. 1990) (“[wle agree with

the Fifth Circuit’s opinion in Wood that the abstention provisions

of 28 U.S.C. §1884(c) (1) (1988) at least partially address the

comity issue and obviate the need for an overly restrictive inter-

pretation of the jurisdictional grant of § 18384(b)”).

19

CONCLUSION

The petitions for a writ of certiorari should be denied.

THOMAS E. Pirts, JR.

SHELLEY C. CHAPMAN

SIDLEY & AUSTIN

875 Third Avenue

New York, NY 10022

(212) 906-2000

JuDY O’ NEILL

LAURA J, EISELE

DYKEMA GOSSETT PLLC

400 Renaissance Center

Detroit, MI 482438

(313) 568-6800

Respectfully submitted,

CARTER G. PHILLIPs *

SIDLEY & AUSTIN

1722 Eye Street, N.W.

Washington, D.C. 20006

(202) 736-8000

LARRY J. NYHAN

JAMES F’, CONLAN

SIDLEY & AUSTIN

One First National Plaza

Chicago, IL 60603

(312) 858-7000

Counsel for Respondents Baxter International Inc. and

Baxter Healthcare Corporation

November 27, 1996

* Counsel of Record

APPENDIX

wy

We

ee

—

RON a eter ee

~

oo

on

la

APPENDIX

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF MICHIGAN

SOUTHERN DIVISION

Case No. 95-CV-72397-DT

Hon. Denise PaGE Hoop

IN RE: Dow CorNING CORPORATION,

Debtor.

MEMORANDUM OPINION AND ORDER

ON REMAND REGARDING SECTION 1334(C)

ABSTENTION

I. INTRODUCTION:

This matter is before the Court on remand from the

United States Court of Appeals for the Sixth Circuit. In

re: Dow Corning Corporation, Nos. 95-2034/2082/2084/

2106/2107, 86 F.3d 482 (6th Cir. 1996) (Amended).

This Court previously entered an order finding that it did

not have subject matter jurisdiction over the tort claims

against the nondebtor defendants pursuant to 28 U.S.C.

§ 157(b)(5). The Sixth Circuit reversed this Court’s

determination on this issue and found that this Court had

subject matter jurisdiction over the tort claims pending

against the nondebtor defendants pursuant to 28 U.S.C.

§ 157(b)(5). The Sixth Circuit remanded this case on

the issue of whether or not this Court should abstain from

the tort claims against the nondebtors pursuant to 28

U.S.C. § 1334(c)(1) and/or (2).

2a

II. ANALYSIS:

A. Whether this Court must abstain or, alternatively,

exercise its discretion to abstain pursuant to 28

U.S.C. § 1334(c).

1. Mandatory Abstention.

The Sixth Circuit has concluded that this Court has

“related to” jurisdiction pursuant to 28 U.S.C. § 1334(b)

over the actions pending against the nondebtors Dow

Chemical, Corning Incorporated, Minnesota Mining, Bax-

ter, and Bristol-Myers Squibb in nonbankruptcy forums

nationwide. In re Dow Corning Corp., supra at 494. In

a section 157(b)(5) motion, an abstention analysis is

required. In re Pan American Corp., 950 F.2d 839, 844

(2nd Cir. 1991); In re Dow Corning Corp., supra at 497.

The Tort Claimants’ briefs and other claimants’ objections

and responses to the nondebtors’ motions under Section

157(b)(5) requested this Court to abstain under 28

U.S.C. § 1334(c).

Section 1334(c) qualifies Section 1334(b)’s broad

grant of jurisdiction. In re Dow Corning Corp. at 497.

There are two types of abstention under Section 1334(c):

discretionary abstention under 28 U.S.C. § 1334(c)(1)

and mandatory abstention under 28 U.S.C. § 1334(c) (2).

Id. Mandatory abstention will be addressed first.

In order for mandatory abstention to apply, a proceed-

ing must: 1) be based on a state law claim or cause of

action; 2) lack a federal jurisdictional basis absent the

bankruptcy; 3) be commenced in a state forum of appro-

priate jurisdiction; 4) be capable of timely adjudication;

and 5) be a non-core proceeding. /d.

As to the first factor, the claims and causes of action

at issue against the nondebtors are personal injury tort

claims which are essentially state law claims. Addressing

the second factor, this Court notes that the Sixth Circuit

held that this Court has “related to” bankruptcy jurisdic-

3a

tion over the nondebtors. The personal injury tort actions

against the nondebtors are not proceedings which need a

determination under the bankruptcy laws and do not

arise in a bankruptcy case. Absent the bankruptcy of the

debtor in this matter, this Court would lack federal juris-

diction over the actions against the nondebtors.' With re-

spect to the third factor, there have been no allegations

that the actions against the nondebtors have not been

commenced in a state forum of appropriate jurisdiction.

Satisfying the fourth factor, the parties have informed the

Court that there are numerous cases ready for trial against

the nondebtors. Furthermore, the Honorable Sam C.

Pointer, Jr. in his March 19, 1996 (Order 29) and April

16, 1996 (Order 29B) orders and the Multidistrict Litiga-

tion Panel’s April 10, 1996 Conditional Remand Order,

indicate there are numerous cases against the nondebtors

which are indeed ready for trial.

Considering the fifth factor, the Court must determine

whether the actions against the nondebtors are non-core

proceedings. There are two categories of core proceed-

ings: proceedings “arising under” title 11 and proceedings

“arising in” title 11. Jn re Harris Pine Mills, 44 F.3d

1431, 1435 (9th Cir. 1995), cert. denied, 115 S.Ct. 2555

(1995). Proceedings “arising under” title 11 “involve a

cause of action created or determined by a statutory pro-

vision of title 11.” Jd. Proceedings “arising in” title 11

are a reference to those “administrative” matters that

1 The only cases against the nondebtors over which this Court

would have jurisdiction, sitting in the Eastern District of Michigan,

are those cases that involve complete diversity. The Court notes

that most of the cases involving the nondebtors also include the

Debtor Dow Corning Corporation which would defeat this Court’s

diversity jurisdiction. (See the Court’s Discretionary Abstention

analysis, infra.) The Court notes that mandatory abstention also

apply to removed cases. William v. Shell Oil Co., 169 B.R. 684, 690-

691 (S.D. Cal. 1994). The Court further notes that absent the

bankruptcy, the Court has no jurisdiction over the cases against the

nondebtors where the claims arose outside of the Eastern District

of Michigan.

4a

arise only in bankruptcy cases and are not based on any

right expressly created by title 11, but nevertheless, would

have no existence outside of the bankruptcy. Jd. Section

157(b)(2) provides a nonexclusive list of proceedings

which are core proceedings. Non-core proceedings are

only “related to” a case under title 11. Jd. at 1435. A

non-core proceeding “does not invoke a substantive right

created by the federal bankruptcy law and is one that

could exist outside of bankruptcy.” Jd.

Personal injury tort or wrongful death claims are ex-

cluded from the catalog of core proceedings by 28 U.S.C.

§ 157(b)(2)(B) and (O) which state in pertinent part:

(b) (2) Core proceedings include, but are not limited

to—

* * *

(B) allowance or disallowances of claims against

the estate or exemptions from property of the estate,

and estimation of claims or interests for the purposes

of confirming a plan under chapter 11, 12, or 13 of

title 11 But not the liquidation or estimation of con-

tingent or unliquidated personal injury tort or wrong-

ful death claims against the estate for purposes of

distribution in a case under title 11;

(O) other proceedings affecting the liquidation of

assets of the estate or the adjustment of the debtor-

creditor or the equity security holder relationship,

except personal injury tort or wrongful death claims.

28 U.S.C. § 157(b)(2)(B) and (QO) (emphasis added).

In re Hughes, 98 B.R. 115, 118 (D.C. 1988). The ac-

tions against the nondebtor defendants are non-core pro-

ceedings under 28 U.S.C. § 157.

Section 157(b)(4) provides that “[nJon-core proceed-

ings under § 157(b)(2)(B) of title 28 [liquidation of

personal injury tort or wrongful death cases], shall not be

subject to the mandatory abstention provisions of Sec-

tion 1334(c)(2).” In re Pan Am, 950 F.2d at 845; 28

5a

U.S.C. § 157(b) (4). As indicated above, the non-core

proceedings included in Section 157(b)(2)(B) are “liqui-

dation or estimation of contingent or unliquidated personal

injury tort or wrongful death claims against the estate for

purposes of distribution in a case under title 11.” (Em-

phasis added). Here, the personal injury and/or wrong-

ful death tort actions are not “against the estate” of the

debtor but against the nondebtors. Consequently, the non-

core proceedings and actions against the nondebtors are

not exempt from mandatory abstention under Section

157(b)(4). Moreover, 28 U.S.C. § 1334(c)(2) pro-

vides for mandatory abstention in cases involving state

law claims for which the sole basis of bankruptcy juris-

diction is “related to” jurisdiction. Celotex Corp. v. Ed-

wards, 115 S.Ct. 1493, 1506, note 10 (1995) (Stevens,

J., dissenting). In the instant case, the Sixth Circuit held

that this Court had Section 1334(b) or “related to” jur-

isdiction over the actions pending against the nondebtors

in nonbankruptcy forums nationwide. In re Dow Corn-

ing, supra at 494. Based on the above, the Court finds

that the four factors calling for mandatory exemption

under Section 1334(c)(2) have been met.

2. Discretionary Abstention.

Alternatively, the Court exercises its discretion to re

mand pursuant to 28 U.S.C. § 1334(c)(1). Section

1334(c)(1) provides:

Nothing in this section prevents a district court in the

interest of justice, or in the interest of comity with

State courts or respect for State law, from abstaining

from hearing a particular proceeding arising under

title 11 or arising in or related to a case under

title 11.

In In re White Motor Credit, 761 F.2d 270 (1985), the

Sixth Circuit noted:

. . . federal courts should be hesitant to exercise

jurisdiction when state issues substantially predomi-

6a

nate, whether in terms of proof, of the scope of the

issues raised, or of the comprehensiveness of the rem-

edy sought.

Id. at 274 (quotations omitted). Here, the personal

injury/tort claims against the nondebtors are predomi-

nantly state law claims. The proof and scope of issues

in dispute and the comprehensiveness of the remedies

sought varies state to state. The Sixth Circuit in Jn re

White Motor further noted that:

. . . in large bankruptcy cases with hundreds or even

thousands of tort litigants beating on the door of one

federal judge, . . . at least judicial economy and ex-

peditiousness, may depend on the court’s authority

to refer cases to other courts. Since the 1984 Bank-

ruptcy Act prevents reference of these tort cases to

bankruptcy courts, as in the past, it makes good sense

to give the district courts wide latitude in referring

the cases through abstention to other courts.

Id. The Court finds that discretionary abstention from

the cases against the nondebtors would best serve the in-

terest of justice and comity. Waiting until the estimation

and confirmation of a plan of reorganization before the

actions against the nondebtors are liquidated would not

result in a more precise estimation of the assets needed

by the debtor’s estate to cover any indemnification and

contribution claims against the debtor’s estate. The esti-

mation of any possible indemnification and contribution

claims by the nondebtors against the debtor’s bankruptcy

estate would not be any different than if the cases against

the nondebtors proceed to trial at this stage. To the con-

trary, as the various trials proceed against the nondebtors,

a clearer picture would emerge as to whether the non-

debtors would have any indemnification or contribution

claims against the debtor’s estate.

The Sixth Circuit opinion addresses the Joint Insurance

issue between Dow Corning, Dow Chemical and Corning

Ta

Incorporated finding that the Court had “related to” jur-

isdiction based on the Joint Insurance between the parties.

The Sixth Circuit opinion does not address the Joint In-

surance issue as it pertains to the abstention issue. This

Court addresses this issue as it relates to the interest of

justice and comity issues which must be addressed in an

analysis of discretionary abstention. Although Dow Chem-

ical has apparently notified insurers that it is asserting

claims against the jointly-held policies, it has been argued

that as to Dow Chemical, the joint policies are in fact

excess policies and that Dow Chemical has sufficient pri-

mary insurance. (Ex. A, p. 5, Official Committee of Tort

Claimants’ Brief, filed June 7, 1996). The Sixth Circuit's

opinion addresses the insurance issue from the point of

view of whether the Debtor’s estate will have sufficient

resources. The Debtor itself has not put forth proof that

its estate would be dissipated based upon the “threat”

posed to those insurance policies by Dow Chemical and

Corning Incorporated. In The Matter of Zale Corp., 62

F.3d 746 (Sth Cir. 1995), the Fifth Circuit found that

even if the bankruptcy court had “related to” jurisdiction

over certain insurance policies with indemnification con-

tracts, a nondebtor should not be shielded by the powers

of the bankruptcy court. /d. at 760-761. The Bank-

ruptcy Code discharges the Debtor’s liabilities and not

those owed by third parties. Jd. at 760, notes 42, 43, and

44; 11 U.S.C. §524(e). If the Court does not abstain

from the tort claims against the nondebtors, the tort claims

against the nondebtors would effectively be determined

by this Court which would be contrary to 11 U.S.C.

§ 524(e). Section 524(e) does not allow the Bankruptcy

Code to be used to discharge the debts of nondebtors. /d.,

at 760, notes 42, 43, and 44. The Court finds that the

“threat” posed to the insurance policies by the nondebtors

does not overcome factors in favor of discretionary ab-

stention. Specifically, the Court finds the interests of jus-

tice and comity weigh in favor of discretionary abstention.

8a

Ill, CONCLUSION:

This Court finds that the cases against the nondebtors

are subject to mandatory abstention under 28 U.S.C.

§ 1334(c)(2). Alternatively, the Court finds that in the

interest of justice, comity and judicial economy, it will

exercise its discretion to abstain from the cases against

the nondebtors under 28 U.S.C. § 1334(c) (1).

Accordingly,

IT IS ORDERED that the actions against the non-

debtor defendants are subject to mandatory abstention

under 28 U.S.C. § 1334(c) (2); alternatively,

IT IS ORDERED that the Court will exercise its dis-

cretion to ABSTAIN from the cases against the non-

debtors under 28 U.S.C. § 1334(c) (1).

DATED: Jui. 30, 1996

/s/ Denise Page Hood

DENISE PAGE Hoop

United States District Judge