# Opposition Brief — Willis v. Celotex Corp., 113 S. Ct. 1846 (1993) (No. 92-1358) > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386011_2117%3A2 ## Record - **Collection:** Supreme Court brief - **Document type:** Opposition Brief - **Published:** January 1, 1993 ## Text ee tapreme Overt, US | pin & D WAR | & 1993 Os Tuk GLERE 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 EE 3 | 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 --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386011_2117%3A2. Public record. Not legal advice.