Opposition Brief — Willis v. Celotex Corp., 113 S. Ct. 1846 (1993) (No. 92-1358)

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No. 92-1358

In The™

Supreme Court of the United States

October Term, 1992

’

DANIEL WILLIS, CAROLYN WILLIS,

HERMAN MENSING, FRANCES MENSING,

VINCENT LEWIS, RUBY LEWIS, ELWOOD HAMLET,

AND LOIS HAMLET,

Petitioners,

THE CELOTEX CORPORATION,

Respondent.

4

On Petition For Writ Of Certiorari

To The United States Court Of Appeals

For The Fourth Circuit

¢

BRIEF IN OPPOSITION

«

JOHN R. BusH

JerFREY W. WARREN

Counsel of Record

Wenpy V. E. ENGLAND

BusH Ross GARDNER WARREN

& Ruby, P.A.

220 South Franklin Street

Tampa, FL 33602

(813) 224-9255

Attorneys for Respondent

COCKLE LAW BRIEF PRINTING CO,, oo 225-6964

OR CALL COLLECT (402) 342-283

QUESTION PRESENTED FOR REVIEW

Should the Court, in its certiorari discretion, review

Willis v. The Celotex Corp., 978 F.2d 146 (4th Cir. 1992) (Pet.

App. at 1-9) which reversed the district court’s (Eastern

District of Virginia, Norfolk Division) January 2, 1991

Order Releasing S upersedeas Bond to Plaintiffs (Pet. App. at

36-43)?

Stated otherwise, at the present time, are there special

and important reasons for the Court’s exercising its cer-

tiorari jurisdiction, the Fourth Circuit not having demon-

strated an apparent departure from the accepted and

usual course of judicial proceedings in vacating the dis-

trict court’s January 1991 order, which order conflicts

with the bankruptcy court’s extant injunction against

petitioners’ executing upon the supersedeas bond?

ii

TABLE OF CONTENTS

Page

QUESTION PRESENTED FOR REVIEW ............

TABLE OF AUTHORITIES............-.secese0e. iii

OPINIONS AND JUDGMENTS BELOW............ 1

STATEMENT OF THE CASE..............00 000000. 2

SUMMARY OF THE ARGUMENT...............-. 4

ARGUMENT........ Wr rr 5

CONCLUSION ....... 00. c0cccccccccecceeeceesees 1

CELOTEX APPENDIX ...........c0cceccececeue. App. 1

ili

TABLE OF AUTHORITIES

Page

CONSTITUTION

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| a 3

STATUTES

Bankruptcy Code § 105(a), 11 U.S.C.A. § 105(a)

Oe a? Se

Judiciary and Judicial Procedure § 158, 28

U.S.C.A. § 158 (West 1968 & Supp.)................ 4

Bankruptcy Code § 524(e), 11 U.S.C.A. § 524(e)

eee wah nxn css ke cuvrcacescccess 9, 10

Va.Cope.ANn. § 8.01-676.1 (Michie 1992).............. 8

Cases

Grubb v. Federal Deposit Ins. Corp., 833 F.2d 222

ee ed cw awa ehn ca cescacsvcawasis 6

In re Celotex Corp., 128 B.R. 478 (Bankr. M.D. Fla.

aah he dc cue n ss sacsuvcsssccccescecs 2, 6

Willis v. The Celotex Corp., 978 F.2d 146 (4th Cir.

a sae vas ka us che sa codcevseca ce 3

CourT RULES

Sup.Cr.R. 10.............. ee 4,5, 10

ecw awa nasncdbacccaccacaceeua 3

ec kn cnc s asa snsccisnveccevecsece 6

ee cucu baad acnscdcanvecnaceces Pe

ee can kas haan ncanauaccrsasececsnac 9

Fia.R.App.P. 9.310, 32 Fra.Stat.ANn. (West &

EES er 7

No. 92-1358

a —

In The

Supreme Court of the United States

October Term, 1992

+

DANIEL WILLIS, CAROLYN WILLIS,

HERMAN MENSING, FRANCES MENSING,

VINCENT LEWIS, RUBY LEWIS, ELWOOD HAMLET,

AND LOIS HAMLET,

Petitioners,

THE CELOTEX CORPORATION,

Respondent.

S

On Petition For Writ Of Certiorari

To The United States Court Of Appeals

For The Fourth Circuit

¢

BRIEF IN OPPOSITION

¢

Respondent, The Celotex Corporation, opposes the

issuance of a writ of certiorari to review the judgment

and opinion of the United States Court of Appeals for the

Fourth Circuit in the above-entitled case.

¢

OPINIONS AND JUDGMENTS BELOW

The United States Bankruptcy Court for the Middle

District of Florida entered its October 17, 1990 order

precluding judgment creditors from proceeding in var-

ious state and federal courts against supersedeas bonds

that The Celotex Corporation, a debtor in possession, had

posted, without the approval of the bankruptcy court.

Pet. App. 5, quoting In re Celotex Corp., 128 B.R. 478, 482

(Bankr. M.D. Fla. 1991); see Celotex App. 1-4.

On January 2, 1991, the United States District Court

for the Eastern District of Virginia entered its ORDER,

reciting that it deemed that its own jurisdiction over a

supersedeas bond posted by Celotex was “proper,” there-

fore “GRANT[ING] release of the proceeds of the super-

sedeas bond.” Pet. App. at 43.

The Fourth Circuit vacated the district court’s Janu-

ary 1991 order, concluding that the Willis plaintiffs’

“immediate execution against sureties on the supersedeas

bonds would have been detrimental to Celotex’s ability to

formulate a plan of reorganization. . . . Consequently, the

bankruptcy court did not act improperly in enjoining

execution on supersedeas bonds posted to secure judg-

ments against Celotex under [Bankruptcy Code § 105(a),

11 U.S.C.A.] § 105(a)....” Pet. App. at 9. The court stated

in its vacating decision that the district court would be

authorized to conduct “further proceedings at such time

as the bankruptcy court lifts the § 105(a) stay.” Id.

%

STATEMENT OF THE CASE

While not suggesting that petitioners have misstated

the case (Petition at 4-8), it is apparent that they have

overstated the facts, particularly with regard to the

underlying personal injury claims, the posting of the

bond, and decisions by the bankruptcy and district

courts. Sup.Ct.R. 14.1(g) requiring a concise statement of

the case containing the facts material to the consideration

of the questions presented, the case is that two separate

and independently created courts, the district court and

the bankruptcy court!, have entered conflicting orders.

On October 17, 1990, the bankruptcy court entered a

temporary injunction, inter alia, prohibiting personal

injury claimants, including petitioners, from levying exe-

cution upon supersedeas bonds, posted by Celotex. Celo-

tex App. 1-4. However, on January 2, 1991, the district

court filed its order, ante at 2, the effect of which did not

enhance petitioners’ ability to collect the judgment,

because the bankruptcy court’s injunction was extant -

the district court could not nullify that order.

The proceedings in the Eastern District of Virginia

were premature as of January 2, 1991, the date of the

district court’s order; and, petitioners’ filing here is

equally premature. Indeed, the Fourth Circuit tacitly

emphasized the lack of ripeness in that circuit: (a) the

bankruptcy court might very well lift its stay?; and (b) the

court concluded, “we vacate the order of the district court

and remand for further proceedings at such tin 2 as the

bankruptcy court lifts the § 105(a) stay.”

In other words, the Fourth Circuit resolved and dis-

posed of any perceived problem that the district court

might have created by filing an order at odds with the

1 U.S. Const. art. I § 8; art. III §§ 1, 2.

2 Willis v. Celotex Corp., n.5 supra at i (Pet. App. at 8).

3 Willis, supra, n.1 (Pet. App. at 9).

bankruptcy court’s 11 U.S.C.A. § 105(a) (West 1993) stay

order; or vice verse, any problem that the bankruptcy

court might have created by entering the stay. Whether

the bankruptcy court was correct, or whether the district

court was correct is beside the point, at least for now,

because petitioner has not yet asked the bankruptcy court

to modify its § 105(a) stay order. Were the Willis peti-

tioners to be unsuccessful in the bankruptcy court, their

recourse is to the United States District Court for the

Middle District of Florida and, if unsuccessful there, to

the Eleventh Circuit. 28 U.S.C.A. § 158 (West 1968 &

Supp.).

*

SUMMARY OF ARGUMENT

Petitioners have not presented”for review a question

that implicates Sup.Cr.R. 10’s “special and important rea-

sons.” The United States Court of Appeals for the Fourth

Circuit has not rendered a decision that “has so far

departed from the accepted and usual course of judicial

proceedings .. . as to call for an exercise of this Court’s

power of supervision.” Id.

If petitioners are correct in their expressed concern as

to a bankruptcy court’s enjoining execution upon a super-

sedeas bond, given by the judgment debtor to stay execu-

tion upon a judgment, their Petition For Writ Of

Certiorari is premature because they have not sought a

modification of the injunction.

*

ARGUMENT

I

The Court’s certiorari review being limited in the

present context to the question whether the Fourth Cir-

cuit has so far departed from the accepted and usual

course of judicial proceedings that there are special and

important reasons for review, petitioners make no show-

ing. Rather, they have submitted a redundant review of

the principles of supersedeas bonds and stays of execu-

tion, and a rather petulant paraphrasing of the Fourth

Circuit’s holding, complaining that the circuit court has

held that an otherwise valid and-operable supersedeas

bond loses its vitality, at least temporarily, “[i]f the judg-

ment debtor becomes insolvent and files for protection

under the Bankruptcy Code....” Pet. at 8-12. It is not at

all apparent that the instant bond has lost its “vitality”

and, moreover, assuming arguendo that a bond is tempo-

rarily ineffective, it does not appear that the Fourth Cir-

cuit’s decision constitutes a “depart[ure] from the

accepted and usual course of judicial proceedings.”

Sur.Ct.R. 10.1. Petitioners do not cite one authority for the

proposition that the decision “departs.”

Nor, is the petitioners’ projected horror story, Pet. at

8-12, at all convincing. As a matter of fact, it is likely that

one might conclude that it is as frivolous as Mr. Heller’s

description of how bored servicemen while away their

time. Id. at 9 n. 2. Neither the bankruptcy court nor the

Fourth Circuit has held that the supersedeas bond has

lost its “vitality” or that petitioners will not collect their

judgments. There is no evidence that the cost of bonds

will be “inflated,” id. at 11, or that the Fourth Circuit’s

decision “will inevitably generate confusion in the courts

concerning the scope of protection that must be afforded

by a supersedeas bond in order [to] entitle a judgment-

loser to a stay under [Fev.R.Civ.P.] 62(d),” id. at 11-12.

Supersedeas bonds are available as a matter of right to

stay executions upon money judgments, the practice

being that the trial court’s approval of the bond is a mere

formality, being limited to the question whether the par-

ticular insurer or the form of the bond is approved or

appropriate.

Moreover, the subject supersedeas bond enhances

rather than depreciates petitioners’ chances of collecting

their judgments. It is indeed difficult to understand peti-

tioners’ logic in arguing that the specter of bankruptcy

court injunctions prohibiting executions upon civil judg-

ment supersedeas bonds would force debtors “to pay trial

court judgments immediately, possibly driving them fur-

ther toward insolvency.” Id. at 11, citing Grubb v. Federal

Deposit Ins. Corp., 833 F.2d 222, 227 n. 3 (10th Cir. 1987).

As the Fourth Circuit noted, Celotex faced 141,000

“asbestos-related personal injury actions” at the time

when it filed for reorganization under Chapter 11 of the

Bankruptcy Code on October 12, 1990. Pet. App. at 8,

citing In re Celotex Corp., 128 B.R. 478, 482-83 (Bankr. M.D.

Fla. 1991). In the real world of massive tort litigation,

manufacturers and distributors seek bankruptcy court

protection for themselves and their creditors; they seek

resolutions of very complex problems. Such cases do not

4 Fep.R.Civ.P. 62(d): “When an appeal is taken the appellant

by giving a supersedeas bond may obtain a stay. . . . The stay is

effective when the supersedeas bond is approved by the court.”

involve the isolated tort. Whether Celotex filed for pro-

tection when it did or earlier, when petitioners obtained

their judgments, is beside the point because the existing

tort system forced Celotex, a former manufacturer of

asbestos-containing products, to seek protection under

the Bankruptcy Code. Once that protection is sought the

interests of all creditors mandate the maintenance of the

status quo pending an evaluation of the fair and equitable

treatment of many thousands of claimants.

Finally, petitioners’ assertion that the Fourth Circuit’s

“opinion . . . will inevitably generate confusion in the

courts concerning the scope of protection that must be

afforded by a supersedeas bond .. . ”, Pet. at 11-12, is

rather extravagant, to say the least. There is no confusion

in federal trial courts, because they are usually governed

by state supersedeas rules which are clear cut in cases of

money judgments. Fep.R.Civ.P. 62(f).5 Generally, in state

court cases supersedeas is a matter of right to suspend

execution upon civil judgments.® Thus there is no need

> Rule 62(f): “Stay According to State Law. In any state in

which a judgment is a lien upon the property of the judgment

debtor and in which the judgment debtor is entitled to a stay of

execution, a judgment debtor is entitled, in the district court

held therein, to such stay as would be accorded the judgment

debtor had the action been maintained in the courts of that

state.”

© See, e.g., Fra.R.App.P. 9.310, 32 Fra.Stat. Ann. (West 1992 &

Supp.): “(STAY PENDING REVIEW): (1)Money Judgments.

When the order is a judgment solely for the payment of money, a

party may obtain an automatic stay of execution pending review

without the necessity of motion or order, on posting of a good

and sufficient bond equal to the principal amount of the

for the Court’s “act[ing] promptly to prevent unnecessary

chaos in the federal and state courts....” Jd. at 12. There

is, and will be, no chaos and confusion.

II

The threshold observation, as to petitioners’ exagge-

rated and unsubstantiated statement that the Fourth Cir-

cuit held that bankruptcy courts have virtualiy limitless

power, Pet. at 12, subheading, is that they have made their

application to the wrong court. As the Fourth Circuit

stated, the essential area of operations should be the

bankruptcy court where petitioners have the absolute and

unfettered right to make their application to lift the

§ 105(a) stay. If they are not satisfied with the court’s

ruling there, they are entitled to appeal it. Candidly, one

must wonder why petitioners have labored so mightily in

the Fourth Circuit which does not have jurisdiction over

judgment plus twice the statutory rate of interest on judgments. . .. ”

Celotex maintains its principal place of business in Florida.

In Virginia, where the subject judgments were rendered and

filed, the rule is substantively identical. Va.Copk.ANN.

§ 8.01-676.1 (Michie 1992): “Security for appeal. — C. Security for

suspension of execution. - An appellant who wishes execution of

the judgment or award from which an appeal is sought to be

suspended during the appeal shall file an appeal bond or irrevo-

cable letter of credit conditioned upon the performance or satis-

faction of the judgment and payment of all dam: zes incurred in

consequence of such suspension, and except as provided in

subsection D, execution shall be suspended upon the filing of

such security and the timely prosecution of such appeal. Such

security shall be continuing and additional security shall not be

necessary except as to any additional amount which may be

added by the courts.”

the United States Bankruptcy Court for the Middle Dis-

trict of Florida.

Petitioners are disingenuous in their statements that

the Court’s assistance is required to correct the state of

affairs as such pertain to the protection of judgment

creditors, and to trial courts’ approval of supersedeas

bonds. Petitioners themselves have not brought this case

here through the proper channel, the Eleventh Circuit.

The bankruptcy courts and the United States District

Courts are courts of limited jurisdiction, each having

certain powers granted by Congress. Taking as a given

the picture painted by petitioners — these separately and

independently constituted courts have entered conflicting

orders — the Fourth Circuit no more has authority to

reverse the bankruptcy court’s order than the Eleventh

Circuit has authority to reverse the district court’s order.

In other words, petitioners have leapfrogged the Eleventh

Circuit and the courts within its jurisdiction.

The adjective nature of the problem being under-

stood, not much remains to be written about petitioners’

arguments, supposedly premised upon Fed.R.Civ.P. 65.1,

and § 524(e) of the Bankruptcy Code, 11 U.S.C.A. § 524(e)

(West 1993). Rule 65.1 is the surety’s consent to the dis-

trict court’s jurisdiction for enforcing (executing upon)

the supersedeas bond, without necessity of filing a sepa-

rate suit or action. Section 524(e) constitutes nothing

more than the common sense proposition that discharge

of a debtor in bankruptcy does not affect the liability of

any other entity or the property of such entity. Peti-

tioners’ statement that the bankruptcy court’s injunction

“directly conflicts with [Rule 65.1 and § 524(e)]”, Pet. at

13, is patently without merit. Of course Aetna Casualty &

10

Surety Company submitted to the district court’s jurisdic-

tion, but such is irrelevant in light of the bankruptcy

court’s jurisdiction to enjoin petitioners’ executing upon

the bond. It is not necessary to further burden the Court

as to § 524(e), there having been no discharge as of this

time.

If petitioners are correct in their various arguments,

e.g., that the Fourth Circuit “cannot [ ] explain” how

precluding execution upon the supersedeas bond facili-

tates the bankruptcy court’s controlling all litigation

involving Celotex, Pet. at 16, it is readily apparent that

they have simply wasted time and resources in the Fourth

Circuit. Without criticizing that circuit, we are left won-

dering how any order by that court would affect a bank-

ruptcy court’s decision in Florida. The best advice for

petitioners is that tacitly enunciated by the Fourth Cir-

cuit: petitioners are entitled to file their application in the

bankruptcy court seeking a modification or lifting of the

§ 105(a) stay and, if unsuccessful there, they may seek a

reversal in the Middle District of Florida or in the Elev-

enth Circuit. If the Eleventh Circuit courts rule incor-

rectly, petitioners are entitled to seek the Court’s

discretionary certiorari review of an important matter

that manifests a departure from the accepted and usual

course of judicial proceedings. Sur.Ct.R. 10.1(a).

°

11

CONCLUSION

The petition should be denied.

Respectfully submitted,

JOHN R. BusH

JEFFREY W. WaRREN

Counsel of Record

Wenpy V. E. ENGLAND

BusH Ross GARDNER WARREN

& Rupy, P.A.

220 South Franklin Street

Tampa, FL 33602

(813) 224-9255

Attorneys for Respondent

INDEX TO APPENDIX

ORDER GRANTING EMERGENCY MOTION

FOR DETERMINATION OF APPLICABILITY

OF § 362 STAY TO PENDING MATTERS OR, IN

THE ALTERNATIVE, FOR EXTENSION OF

§ 362 TO PENDING MATTERS

App. 1

UNITED STATES BANKRUPTCY COURT

MIDDLE DISTRICT OF FLORIDA

TAMPA DIVISION

®

IN RE: Chapter 11

THE CELOTEX CORPORATION, Consolidated

et al., Case Nos.:

90-10016-8B1 and

Debtors. 90-10017-8B1

/

ORDER GRANTING EMERGENCY MOTION

FOR DETERMINATION OF APPLICABILITY OF

§362 STAY TO PENDING MATTERS OR,

IN THE ALTERNATIVE, FOR EXTENSION OF

§362 STAY TO PENDING MATTERS

THIS CAUSE came before the Court upon the

Debtors’ Motion for Determination of Applicability of

§362 Stay to Pending Matters or, in the Alternative, for

Extension of §362 Stay to Pending Matters (the

“Motion”). There being no objection hereto by the United

States Trustee, and the Court having considered the

Motion, the arguments of counsel regarding the merits of

the Motion, the record in the case and being otherwise

duly advised in the premises, finds that this Court pur-

suant to 28 USC §1471(e), has exclusive jurisdiction of all

of the property of The Celotex Corporation and Carey

Canada Inc., wherever located, and that this Court, pur-

suant to §§105 and 362 of the Bankruptcy Code, may

issue any order, process or judgment as may be necessary

or appropriate to carry out the provisions of the Bank-

ruptcy Code and sufficient cause appearing therefore, it

is hereby

App. 2

ORDERED, ADJUDGED AND DECREED that:

1. Debtors’ Motion be, and the same is, hereby

granted.

2. All persons (including individuals, partnerships

and corporations, and all those acting for or on their

behalf), and all governmental units (including the United

States of America and any State, Commonwealth, District,

Territory, municipality, department, agency or instru-

mentality of the United States, a State, a Commonwealth,

a District, a Territory, a municipality, a foreign state, or

other foreign or domestic governments, and all those

acting for or on their behalf and all other entities (collec-

tively, “Entities”) be and each of them are hereby stayed,

restrained and enjoined from:

a. Commencing or continuing, including issu-

ing or employing process, any judicial,

administrative or other proceeding against

any of the Debtors that was or could have

been commenced before the commencement

of the Debtors’ Chapter 11 cases, or recover-

ing a claim against any of the Debtors that

arose before the commencement of the

Debtors’ Chapter 11 cases;

b. Enforcing, against any of the Debtors or

against property of any of the Debtors, a

judgment obtained before the commence-

ment of the Chapter 11 cases;

c. Taking any act to obtain possession of prop-

erty of any of the Debtors or of property

from any of the Debtors;

App. 3

d. Taking any act to create, perfect or enforce

any lien against property of any of the

Debtors;

e. Taking any act to create, perfect or enforce

against property of any of the Debtors, any

lien to the extent that such lien secures a

claim that arose before the commencement

of the Chapter 11 cases;

f. Taking any act to collect, assess, or recover a

claim against any of the Debtors that arose

before the commencement of the Chapter 11

cases; and

g. Offsetting any debt owing to any of the

Debtors which arose before the commence-

ment of the Chapter 11 cases against any

claim against any of the Debtors.

3. Notwithstanding any exceptions or limitations to

the automatic stay contained in §362(b) of the Code, ail

Entities are hereby jointly and severally stayed,

restrained and enjoined from commencing or continuing

any judicial, administrative or other proceeding involv-

ing any of the Debtors regardless of (a) who initiated the

proceeding, (b) whether the matter is on appeal and a

supersedeas bond has been posted by the Debtors or (c)

the appellant in an appeal is one of the Debtors.

4. On request of a party in interest, and after not

less than thirty (30) days’ written notice to the attorneys

for the Debtors, and after a hearing, this Court may

consider granting relief from the restraints imposed

herein in the event that it be deemed necessary, appropri-

ate and warranted to so terminate, annul, modify or

condition

App. 4

5. The automatic stay under §362 of the Bankruptcy

Code and as extended by this Order operates to stay the

continuation of pending matters only as against The

Celotex Corporation and Carey Canada Inc. and does not

operate to stay the continuation of such matters as

against any other named defendant therein unless pro-

ceedings under the Bankruptcy Code have been com-

menced by or against such other named defendant.

DONE AND ORDERED at Tampa, Florida, on

October 17, 1990.

/s/ Thomas E. Baynes

Thomas E. Baynes, Jr.

United States Bankruptcy

Judge

cc: Jeffrey W. Warren, Esq.

Lynne L. England, Esq.

Debtors