Petition for Writ of Certiorari — Official Committee of Tort v. Dow Corning Corp.

FILE D

/ us 4 1997

No. A Ki _*

OFFICE OF THE CLENT

IN THE

Supreme Court of the United States

OCTOBER TERM, 1997

aaa

OFFICIAL COMMITTEE OF TORT CLAIMANTS,

Petitioner,

sail cies

DOW CORNING CORPORATION, THE DOW CHEMICAL

COMPANY, and CORNING INCORPORATED,

Respondents.

ON PETITION FOR A WRIT OF CERTIORARI TO THE UNITED STATES

COURT OF APPEALS FOR THE SIXTH CIRCUIT

PETITION FOR A WRIT OF CERTIORARI

MARVIN E. FRANKEL

(Counsel of Record)

Kenneth H. Eckstein

Jeffrey S. Trachtman

Kramer, Levin, Naftalis

& Frankel

919 Third Avenue

New York, New York 10022

(212) 715-9100

Attorneys for the Official

Committee of Tort Claimants

i

QUESTIONS PRESENTED

1. Whether a court of appeals may review on

mandamus a decision ordering mandatory abstention with

respect to claims against nondebtor defendants in light of the

proscription against appellate review contained in 28 U.S.C.

§ 1334(d).

Va Whether 28 U.S.C. § 157(b)(5) empowers a

district court in which a Chapter 11 bankruptcy case is

pending against a tortfeasor debtor corporation to transfer to

itself, from state and federal courts throughout the country,

cases pending against alleged joint tortfeasors that are not

debtors in the bankruptcy.

il

PARTIES TO THE PROCEEDINGS BELOW

In addition to the parties listed in the caption, the

following parties participated in proceedings in the Sixth

Circuit: Heidi Lindsey; John M. O’Quinn; Johnson County,

Texas, Plaintiffs; Breast Implant Tort Claimants Represented

by John O’Quinn; Office of the United States Trustee; MDL

Panel; Baxter Healthcare Corp. and Baxter Int’l, Inc.;

Minnesota Mining and Mfg. Co.; Bristol-Myers Squibb Co.

and Medical Engineering Corp.; California Plaintiffs’

Steering Committee, as amicus curiae; Official Committee of

Unsecured Creditors, as Intervenor.

ili

TABLE OF CONTENTS

Page

QUESTIONS PRESENTED ..............__. i

PARTIES TO THE PROCEEDINGS BELOW ...___- ii

TABLE OF CONTENTS................__. ili

TABLE OF AUTHORITIES..............__. iv

OPINIONS BELOW .................. 2

siete, 3

STATUTES INVOLVED ..............___ 3

STATEMENT OF THECASE ..........____ 3

REASONS FOR GRANTING THE WRIT ...___ 7

ii 18

iV

TABLE OF AUTHORITIES

Cases: Page

A.H. Robins Co. v. Piccinin,

788 F.2d 994 (4th Cir. 1986) ............ 16, 17

In re Dow Corning Corp.,

187 B.R. 919 (.D. Mich. 1995) ............. 2

EEOC V. K-Mart Corp.,

694 F.2d 1055 (6th Cir. 1982) ............. 13

Gravitt v. Southwestern Bell Telephone Co.,

SORES, Tee aeee ss ee ee ee RS 9

Lindsey v. Dow Chemical Co. (In re Dow

Corning Corp.), 113 F.3d 565 (6th Cir. 1992) . . 7, 10

Lindsey v. O’Brien, Tanski, Tanzer &

Young Health Care Providers (In re Dow

Corning Corp.), 86 F.3d 482 (6th Cir. 1996),

cert. denied, 117 S. Ct. TI6 GPP) ww wc. 6

National R. Passenger Corp. v. National Assoc. of

R. Passengers, 414 U.S. 453 (1974) .......... 10

Official Committee of Tort Claimants v.

Dow Corning Corporation (In re Dow

Corning Corp.), 117 S. Ct. 718 (1997) .... 2, 14n4

Vv

Pierpoint v. Barnes, $4 F.3q 813 (2d Cir. 1996),

cert. denied, 117 S. Ct. 1691 (1997)... 9

Sheet Metal Workers’ Int’] Assoc. y. Carter,

450 U.S. 949 Re th ee eo ae en 13

In re Silicone Gel Breast Implants Prods. Liab.

Litig., 887 F. Supp. 1455 (N.D. Ala. eee... 4

Thermtron Prods., Inc. y. Hermansdorfer,

423 U.S. 336 oii ME Re 8 &n.J

9,12n2

Things Remembered, Inc. v. Petrarca,

116 S. Ct. 494 ROE 5 Sol ed ee 9, 12

United States y. Rice, 327 U.S. 742 ( ete te 9

In re United States Brass Corp.,

110 F.3d 126] (7th Cir. Sains Se ee 9

In re United States Lines, 128 B.R. 339

(S.D.N.Y. mee Sic ws deo 15

Will v. Calvert Fire Ins. ca.

437 U.S. 655 ii, 13 n.3

Statutes and Legislative Materials:

28 U.S.C. § POOP nt rc ae Oe Passim

28 U.S.C. § TOM <5. 5 shi 3

vi

ae Uae. 6 Se 6k ee ee Oe eee 6

20 U4. § Tse ab eee see 3

28 U.S.C. © Eee: Sb a <0 e ee eee passim

te U.S... §- AS. i. 4 ka awe eee 16

a US. = 3607 @) «..4.< cae ea eee 8 & n.1

28 U.S.C. §1447(d) .............. 8,12 &n.2

28 U.S.A. § P05 ov cs eae 8,9, 10, 12

All Wrias Act, Z6 U.S.C. § G08 3 05 se oes 6, 10

136 Cong. Rec. $17570-02,

Oist Come., 26: DOB. ook a os a eee eae 12

Other Authorities:

Richard B. Sobol, Bending the Law, The Story of

the Dalkon Shield Bankruptcy (1991) .......... 16

No. 97-

—_—_

IN THE

SUPREME COURT OF THE UNITED STATES

October Term, 1997

OFFICIAL COMMITTEE OF TORT CLAIMANTS,

Petitioner,

-V.-

DOW CORNING CORPORATION , THE DOW

CHEMICAL COMPANY, and CORNING

INCORPORATED,

Respondents.

ON PETITION FOR A WRIT OF CERTIORARI TO THE UNITED STATES

COURT OF APPEALS FOR THE SIXTH CIRCUIT

PETITION FOR A WRIT OF CERTIORARI

Petitioner, the Official Committee of Tort Claimants

(the "Tort Committee") of Dow Corning Corporation ("Dow

Corning" or the "Debtor"), petitions for a writ of certiorari

to review the decision of the United States Court of Appeals

for the Sixth Circuit issued on May 8, 1997. The Sixth

Circuit reversed the holding of the United States District

Court for the Eastern District of Michigan ordering

mandatory and discretionary abstention with respect to state

law tort claims pending against nondebtor corporate

defendants that the Debtor had sought to transfer to the

District Court overseeing its bankruptcy. Review is sought

2

of the holding that the Court of Appeals had subject matter

jurisdiction to issue a writ of mandamus reversing the

abstention decision notwithstanding the provision of 28

U.S.C. § 1334(d) that decisions granting abstention are "not

reviewable by appeal or otherwise by the court of appeals."

The Tort Committee also seeks review of the Sixth Circuit’s

underlying holding that 28 U.S.C. § 157(b)(5) permits

transfer of claims against nondebtors.

OPINIONS BELOW

The District Court’s unreported decision ordering

mandatory and discretionary abstention for all pending

nondebtor cases was issued on July 30, 1996 and is reprinted

at 13a-20a. The Sixth Circuit’s May 8, 1997 decision

granting mandamus and reversing the July 30 decision,

reprinted at la-12a, is reported at 113 F.3d 565.

The District Court previously issued two opinions on

September 12, 1995 that were the subject of earlier appeals

to the Sixth Circuit. The one relevant here denied on

jurisdictional grounds Dow Corning’s motion to transfer

claims pending against its corporate parents, Dow Chemical

Company ("Dow Chemical") and Corning Incorporated

("Corning"). It is reprinted at 49a-76a and reported at 187

B.R. 919. The Sixth Circuit reversed that decision on April

9, 1996, holding that claims against the nondebtors were

within the District Court’s "related to" jurisdiction and could

be transferred pursuant to 28 U.S.C. § 157(b)(5). That

decision, reported at 81 F.3d 635, was withdrawn, and an

amended opinion, issued on June 3, 1996, is reported at 86

F.3d 482. The latter decision, reprinted at 21a-48a, was the

subject of a petition for a writ of certiorari, which was

denied on January 6, 1997, 117 S. Ct. 718.

3

JURISDICTION

The decision of which review is sought was issued on

May 8, 1997. This Court has jurisdiction to grant a writ of

certiorari pursuant to 28 U.S.C. § 1254(1).

STATUTES INVOLVED

28 U.S.C. § 1334(c)(2) provides: "Upon timely

motion of a party in a proceeding based upon a State law

claim or State law cause of action, related to a case under

title 11 but not arising under title 11 or arising in a case

under title 11, with respect to which an action could not have

been commenced in a court of the United States absent

jurisdiction under this section, the district court shall abstain

from hearing such proceeding if an action is commenced, and

can be timely adjudicated, in a State forum of appropriate

jurisdiction."

28 U.S.C. § 1334(d) provides in relevant part: "Any

decision to abstain or not to abstain made under this

subsection (other than a decision not to abstain in a

proceeding described in subsection (c)(2)) is not reviewable

by appeal or otherwise by the court of appeals under section

158(d), 1291, or 1292 of this title or by the Supreme Court

of the United States under section 1254 of this title."

28 U.S.C. § 157(b)(5) provides: "The district court

Shall order that personal injury tort and wrongful death

Claims shall be tried in the district court in which the

bankruptcy case is pending, or in the district court in the

district in which the claim arose, as determined by the

district court in which the bankruptcy case is pending."

4

STATEMENT OF THE CASE

The Petitioner Tort Committee was appointed in Dow

Corning’s bankruptcy case to represent the interests of

hundreds of thousands of product liability/tort claimants -

against the Debtor. The Debtor’s principal liability consists

of billions of dollars of claims by women suing for diseases

and injuries alleged to have been caused by silicone gel

breast implants created and marketed by the Debtor and

others. As asserted against the Debtor and Dow Chemical,

the pertinent facts may be summarized as follows:

The first breast implant using silicone manufactured

by the Debtor was implanted into a woman in 1962 -- at a

time when the safety of the implanted materials had not been

tested on any animal. Relying for silicone’s safety on

inadequate research dating from the 1940s and no testing, the

Debtor began actively marketing silicone breast implants in

1964, representing that silicone products were permanent,

completely safe, and non-toxic. See Jn re Silicone Gel Breast

Implants Prods. Liab. Litig., 887 F. Supp. 1455, 1457-58

(N.D. Ala. 1995) (vacating summary judgment in favor of

Dow Chemical). Claims against the Debtor and Dow

Chemical include charges of negligence, fraud, and

conspiracy based on their failure to disclose substantial

amounts of data indicating dangers of serious disease from

silicones let loose in the human body and the disease and

injuries caused to the plaintiffs by silicone gel implants.

When a global class action settlement negotiated in

proceedings before District Judge Sam C. Pointer, Jr., in

Alabama collapsed in 1995, Dow Corning entered bankruptcy

and the claims pending against it were automatically stayed.

Claims have proceeded, however, against nondebtor

5

defendants, including Dow Chemical, which has been sued

for its allegedly independent tortious conduct in connection

with development and testing of silicone for medical

purposes.

As noted, upon filing for Chapter 11 protection (on

May 15, 1995), the Debtor had an automatic stay of all

actions against it under Bankruptcy Code § 362(a). In

addition, the Debtor immediately commenced an adversary

proceeding seeking a temporary restraining order (denied on

May 26, 1995) and then a preliminary injunction under § 105

of the Bankruptcy Code barring opt-out plairtiffs from

proceeding to trial against its nondebtor shareholders, Dow

Chemical and Corning. After the Debtor abandoned its

efforts to present adequate proof to justify a preliminary

injunction, Bankruptcy Judge Arthur Spector dismissed the

proceeding on June 8, 1995, and no appeal was taken.

The Debtor then sought to bar litigation against its

shareholders by moving on June 12, 1995 to transfer to the

district court not only the already Stayed cases against itself

but also those proceeding towards trial against Dow Chemical

and Corning. Three other ondebtor breast implant

defendants, also large corporations not in bankruptcy, moved

two days later for transfer of cases pending against them. ~

The District Court ordered transfer of the claims

pending against the Debtor, leaving the case files in the

courts where the claims were pending (in most cases, before

Judge Pointer in Alabama, to whom many cases had been

transferred by the Panel for Multi-District Litigation

following removal). The District Court held that it lacked

"related to" jurisdiction under 28 U.S.C. § 1334(b) over

claims against nondebtor defendants. That decision was

6

reversed by the Sixth Circuit last year in Lindsey v. O’Brien,

Tanski, Tanzer & Young Health Care Health Care Providers

(In re Dow Corning Corp.), 86 F.3d 462 (6th Cir. 1996)

("Lindsey I"), cert. denied, 117 S. Ct. 718 (1997). The

court found "related to" jurisdiction over claims against

nondebtor defendants because of the potential for claims

against jointly held imsurance (with respect to the

shareholders) and for contribution claims against the estate

(with respect to all of the nondebtor defendants) and held that

28 U.S.C. § 157(b)(5) authorized transfer of nondebtor

cases. With no appeal issue as to abstention before it, the

Circuit observed that this subject would remain open before

the District Court on the remand, noting that "the district

court is in a better position to make the necessary abstention

determinations." 86 F.3d at 498.

Following remand, the District Court issued an order

on July 30, 1996 holding that both mandatory and permissive

abstention were appropriate for all the nondebtor breast

implant claims. The Debtor and the nondebtor defendants

appealed from this decision, and the Tort Committee moved

to dismiss the appeal on the ground that decisions granting

abstention under 28 U.S.C. § 1334(c) are not reviewable on

appeal or otherwise, under 28 U.S.C. § 1334(d), quoted

above at p. 3.

The Court of Appeals, however, treated the appeal as

a petition for mandamus and granted mandamus to Dow

Corning, reversing the global abstention rulings with respect

to Dow Chemical and Corning. The court found that it had

jurisdiction on two grounds: First, it said, because Judge

Hood had failed to follow its earlier mandate by improperly

abstaining globally and, second, because Congress had

omitted 28 U.S.C. § 1651 from the list of statutes recited in

7

§ 1334(d), giving rise to the inference under the maxim

“expressio unius est exclusio alterius" that it intended thereby

to make abstention rulings reviewable by mandamus. The

court remanded with instructions to the District Court to

conduct a case-by-case analysis to determine which pending

proceedings were subject to mandatory abstention. See

Lindsey v. Dow Chemical Co. (In re Dow Corning Corp.),

113 F.3d 565, 569, 572 (6th Cir. 1997) ("Lindsey II"). The

Sixth Circuit left standing the abstention decision with respect

to the other nondebtor defendants, which have no corporate

relationship to the Debtor.

REASONS FOR GRANTING THE WRIT

The decision of the Court of Appeals, allowing

mandamus as a means of reviewing a mandatory abstention

decision, is at war with the unambiguous proscription of such

review in 28 U.S.C. § 1334(d) and with the principles of this

Court’s decisions enforcing similar statutory prohibitions

against appeals of orders to remand state law cases to the

state courts from which removal was attempted. The

asserted justifications for this use of mandamus amount to

effective nullification of the statutory bar, which is meant to

enforce respect for expeditious state proceedings.

Preceding and underlying the issue of appellate

jurisdiction, the Sixth Circuit’s decision that 28 U.S.C. §

157(b)(5) requires or permits transfer of claims against

nondebtor defendants, which have not submitted themselves

to the bankruptcy jurisdiction, represents an unwarranted

expansion of a statute that merely empowers the district court

sitting in bankruptcy to determine the venue for liquidating

personal injury claims against the estate. Reversal on this

point would enforce cognate principles and lead to the same

8

result as the district court’s abstention decision: leaving state

law tort litigation against nondebtors where it belongs -- in

state court. Both interrelated points are of vast importance

in regulating the bankruptcy jurisdiction and confining it to

bounds consistent with the claims of federalism.

1. This case affects thousands of tort claimants

and their relationship to the second largest bankruptcy in

United States history. The Sixth Circuit’s granting of

mandamus presents a question of importance that is likely to

reverberate in future mass tort bankruptcies. But even if the

setting did not bespeak the importance of the issues

presented, the case would present compelling issues as to the

breadth of the Circuit’s appellate jurisdiction measured

against direct limitations imposed by Congress as such

limitations have been construed in apposite decisions of this

Court.

28 U.S.C. § 1334(d) provides that orders granting

mandatory or discretionary abstention "are not reviewable on

appeal or otherwise by the court of appeals." This Court

made clear in Thermtron Prods., Inc. v. Hermansdorfer, 423

U.S. 336 (1976), that identical language in 28 U.S.C. §

1447(d) absolutely bars review -- by mandamus as well as on

appeal -- of orders remanding cases on any of the grounds

specified in § 1447(c).' Violation of this rule has led to

In Thermtron the Court found the statutory barrier to appeals

inapplicable because the remand had been ordered "on grounds

not authorized by § 1447(c)." Jd. at 344. No similar argument

is available to respondents here, where the mandatory and

discretionary abstention order was precisely the kind of "decision

to abstain" declared by 28 U.S.C. § 1334(d) to be “not

reviewable by appeal or otherwise."

EE

EN NE i A OC ate Wiest AID a

9

summary reversal. See Gravitt v. Southwestern Bell

Telephone Co., 430 U.S. 723, 724 (1977). The Court has

also recently considered the effect of 28 U.S.C. § 1452(b),

which contains the same bar against appeals of remand orders

following removal in connection with bankruptcies. Things

Remembered, Inc. v. Petrarca, 116 S. Ct. 494, 496-97

(1995). The Court there pronounced the principle leading to

the unanimous affirmance of the Sixth Circuit, a principle

from which the latter court departed in the present case:

"Congress has placed broad restrictions on the power of

federal appellate courts to review district court orders

remanding removed cases to state court." Id. at 496. See

also In re United States Brass Corp., 110 F.3d 1261, 1266

(7th Cir. 1997) (Posner, J.) (observing that § 1452(b) "bars

review by appeal or otherwise, which would seem to take in

mandamus").

The Court in Thermtron observed the basis for the

Congressional policy against review of remand orders: "to

prevent delay in the trial of remanded cases by protracted

litigation of jurisdictional issues." Jd. at 351. See also, é.2.,

United States v. Rice, 327 U.S. 742, 752 ( 1946) (discussing

"Congressional policy of avoiding interruption of the

litigation of the merits of removed causes, properly begun in

State courts"); Pierpoint v. Barnes, 94 F.3d 813, 819 (2d

Cir. 1996) ("Review of remand orders delays litigation and

adds unnecessary expense. A firm policy of declining to

review remand orders allows litigants to proceed with the

litigation in a timely fashion in state court."), cert. denied,

117 S. Ct. 1691 (1997).

The Sixth Circuit in this case has announced two

untenable grounds for departing from the settled rule against

appeal of abstention and remand orders. First, the court held

10

that the District Court’s July 30 decision violated the

Circuit’s mandate by failing to analyze abstention on a case-

by-case basis. See 113 F.3d at 569, App. 6a-7a. But the

Circuit’s earlier decision had involved only the question

whether claims against nondebtors fell within the "related to"

jurisdiction of § 1334(b). There was no occasion on that

appeal to rule on mandatory or discretionary abstention,

although the Circuit saw fit to go on and state general

guidelines for that subject. The anticipatory statement of the

court’s views could not create appellate jurisdiction,

forbidden by statute, when an attempted appeal later

proposed the issues, for the first time, as matters for

decision.

In any event, the Sixth Circuit’s principal ground for

finding that it had mandamus jurisdiction was application of

the doctrine of "expressio unius est exclusio alterius" to infer

that Congress had intended to make mandamus review

available when, in 1990, it added to § 1334(d) a recitation of

several statutes under which review was unavailable but did

not include a reference to the All Writs Act, 28 U.S.C. §

1651, which serves as the jurisdictional basis for orders of

mandamus. See Lindsey II, 113 F.3d at 569, App. 7a. But

the error in this analysis is demonstrable in several ways.

First, the court ignored that the same language was also

added to § 1452(b) but that no case has ever found that the

amendment to either section operates to permit mandamus

review. Even more central here is this Court’s teaching that

"basic general principles of statutory construction" like

expressio unius "must yield to clear contrary evidence of

legislative intent." National R. Passenger Corp. v. National

Assoc. of R. Passengers, 414 U.S. 453, 458 (1974). The

"contrary evidence" in this case is compelling.

1]

ong Staite

Congress amended § 1334(d) and specified the statutes

under which review was not to be allowed, not to make

mandamus relief available, but to make clear that appellate

review is prohibited only in the Courts of Appeals and this

Court, while abstention decisions in the bankruptcy court

may be reviewed in the district court:

Section 309 would amend 11 U.S.C. 305(c)

and [28] U.S.C. 1334(c)(2) and 1452(b) to

clarify that, with respect to certain

determinations in bankruptcy cases, they

forbid only appeals from the district courts to

the courts of appeals, not from bankruptcy

courts to the district courts.

The statutes provide that bankruptcy judges’

orders deciding certain motions (motions to

abstain in favor of, or remand to, state courts)

are unreviewable "by appeal or otherwise."

Because bankruptcy judges may enter trial

orders only if there is appellate review in an

Article III court, one result of this limitation

is that bankruptcy judges cannot make final

judgments in such cases even when they

clearly involve "core" proceedings.

gts: Phen 45: a ~

Section 309 would authorize bankruptcy

judges to enter binding orders in connection

with abstention determinations under Title 11

or Title 28 and remand determinations under

Title 28, subject to review in the district

court. The statutory language under each of

these sections now provides that the decision

of the bankruptcy court (to abstain or remand)

1 i a abe Sic Aap atm tat ce

be ONE ra ces tea

12

"is not reviewable by appeal or otherwise."

The proposed amendment would modify these

three sections to provide that the decision of

the bankruptcy court is not reviewable "by the

court of appeals . . . or by the Supreme Court

of the United States .. ." Such

determinations would therefore be reviewable

by the district court.

136 Cong. Rec. $17570-02, *17580, 101st Cong., 2d Sess.,

Oct. 27, 1990 (ellipses in original; emphasis added). It is

clear that the particular statutes were recited to erase any

conceivable doubt that review only in the Courts of Appeals

and this Court would be barred; there is no sound way to

discover a new intention by Congress to make mandamus

review available under a statute that previously had barred

it.

There is no basis for distinguishing among §§

1447(d), 1334(d), and 1452(b), all of which manifest the

"strong congressional policy" against review of abstention

and remand orders. See Things Remembered, 116 S. Ct. at

499 (Ginsburg, J. concurring); see also Sheet Metal Workers’

Int’l Assoc. v. Carter, 450 U.S. 949 (1981) (Rehnquist, J.,

dissenting from denial of certiorari) (failure to follow

Congressional mandate against review of remand orders

As noted above, this Court has held that under 28 U.S.C. §

1447(d), which contains the same language withovt the

enumeration of statutes, mandamus review is not available when

remand is ordered on a ground covered by the statute. See

Thermtron Prods.

aimee pela RO cy Led aint nwa

13

warrants "at least review by this Court, if not summary

reversal").?

In reaching out to find mandamus jurisdiction here,

the Court of Appeals cited cases authorizing mandamus to

address "questions of unusual importance necessary to the

economical and efficient administration of justice." 113 F.3d

at 569 (quoting E.E.O.C. v. K-Mart Corp., 694 F.2d 1055

(6th Cir. 1982)). But the authority cited concerned the use

of mandamus to circumvent problems of finality with respect

to issues that would otherwise be reviewable on appeal from

a final order. The Circuit cited no case (and we know of

none) in which mandamus jurisdiction was invoked to review

a decision expressly placed beyond appellate review as a

substantive matter by Congress. The Circuit’s unprecedented

expansion of mandamus provides a strong basis for the

granting of certiorari.

2. An additional ground for granting the petition

is the Circuit’s holding that 28 U.S.C. § 157(b)(5) empowers

a district court sitting in bankruptcy to order transfer to itself

of any "related to" case from anywhere in the country. The

holding represents a plain misreading of the statute that,

Even with respect to discretionary abstention decisions under

non-statutory doctrines as to which Congress has not proscribed

appellate review, a plurality of this Court has held that such

determinations "ought not to be overridden by a writ of

mandamus" because "[w]Jhere a matter is committed to the

discretion of a district court, it cannot be said that a litigant’s

right to a particular result is ‘clear and indisputable.’" Will v.

Calvert Fire Ins. Co., 437 U.S. 655, 665-66 (1978) (opinion of

Justice Rehnquist joined by Justices Stewart, White, and

Stevens).

14

combined with the Circuit’s expansive reading of "related to"

jurisdiction, threatens to undermine the balance struck by

Congress in defining the powers of courts sitting in

bankruptcy .*

The starting point for analysis is, of course, the

language of § 157(b)(5):

The district court shall order that personal

injury tort and wrongful death claims shall be

tried in the district court in which the

bankruptcy is pending, or in the district court

in the district in which the claim arose, as

determined by the district court in which the

bankruptcy case is pending.

The most striking thing about that provision for present

purposes is that the word "transfer" is nowhere to be found

in it. The result of that omission for the nondebtors is that

they had no basis in law for the transfers they sought.

Section 157(b)(5) is a venue-setting provision for

personal injury tort cases against the debtor. This becomes

clear from the setting of this provision within § 157 as a

. This issue was raised in the petition for certiorari that was

denied earlier this year, 117 S. Ct. 718. However, the previous

petition was vigorously opposed on grounds of mootness because

of the district court’s intervening abstention ruling. That

asserted obstacle is gone now, and the reversal of the abstention

order gives rise to the first of the questions presented for review.

The related question of "transfer" under § 157(b)(5) creates a

wider focus for interrelated aspects of the bankruptcy

jurisdiction.

Se ee ee ee aes

15

whole, which deals generally with the division of

responsibility between the district and bankruptcy courts.

Literally, of course, when § 157(b)(5) refers to "personal

injury and wrongful death claims" without qualification, it

could mean such claims against anyone, anywhere. But it

obviously does not mean that. It means non-core proceedings

triable by the district court, not the bankruptcy court. See In

re United States Lines, 128 B.R. 339, 341 (S.D.N.Y. 1991).

What kind of non-core proceedings? Section 157(b)(2)(B)

answers this question: "personal injury tort or wrongful

death claims against the estate" (emphasis added).

The looser conception of § 157(b)(5) has crept into

some cases because "transfer" is a perfectly sensible word to

apply to the power over cases in which the debtor is a

defendant. Such cases are automatically in the bankruptcy

court in the fundamental sense that they are held in place by

that court by virtue of the automatic stay imposed by

Bankruptcy Code § 362(a). For those cases, the bankruptcy

district court is empowered to say whether they may be tried

at all so long as the bankruptcy is pending. It is a rational

corollary to grant the power to say where they may be tried.

In that orderly scheme of things, -it is suitable to speak of the

venue-setting power of the district court as a power of

"transfer." But the notion of a wider power over cases

between nondebtors is embraced neither by the statutory

language nor by the essential scheme of the relevant

Bankruptcy Code provisions.

As against the sound understanding that § 157(b)(5)

refers to claims against a bankrupt estate, the extraordinary

power to transfer nondebtor cases from courts throughout the

country, both state and federal, is a kind of sweeping

authority that would require the most persuasively explicit

16

Statutory language. When Congress meant to provide for

transfer only of cases pending in federal courts, and then

only for purposes of pretrial handling, it created a special

multi-judge tribunal for the purpose. 28 U.S.C. § 1407.

There is no persuasive suggestion anywhere that Congress

intended to grant the headier power the respondents claim --

to pluck cases out of state and federal courts everywhere into

the jurisdiction of any single district judge in bankruptcy

cases. That power, if it had ever been contemplated, would

entail (in this and other cases) the compelled transfer for

trial of litigants, their witnesses, and their lawyers to a

federal forum alien to and often distant from the states in

which (and under the laws of which) the cases had been

brought. A result so astounding is nowhere embraced in or

foretold by the visible language and purpose of 28 U.S.C.

§ 157(b)(5).

The contrary view pressed by respondents and

adopted by the Sixth Circuit has its judicial origin and

principal support in A.H. Robins Co. v. Piccinin, 788 F.2d

994 (4th Cir. 1986), which turns out upon close inspection to

be strange authority indeed, notably because no transfer of

claims against nondebtors -- or even claims against the debtor

-- ultimately was ever authorized or made in that case. It is

true that Judge Mehrige ordered transfer there of "related to"

- cases, but his order to that effect was remanded because the

affected parties had not received necessary notice of the

proposed transfers. Jd. at 1015-16. On remand, that notice

was never given; the transfers never happened; and the

Robins reorganization went forward to completion

unimpeded. See Richard B. Sobol, Bending the Law: The

Story of the Dalkon Shield Bankruptcy 66 (1991).

17

Moreover, the Fourth Circuit’s discussion of the

transfer issue in Robins proceeds entirely upon considerations

relating to suits against the debtor and does not reason at all

about the subject of possible "related" cases against

nondebtors. The Fourth Circuit’s opinion repeatedly refers

to "tort cases against a Chapter 11 debtor" (788 F.2d at

1010); transfer of venue "of a case against the bankrupt to

another district" (id. at 1010-11); "personal injury tort claims

against a debtor" (id.); and so on for several pages.

Codefendants are mentioned only in one passing reference

(id. at 1016), strongly suggesting that the court simply never

focused on the question whether § 157(b)(5) was intended to

permit transfer of nondebtor claims.

The Sixth Circuit relied heavily on statements in

Robins that claims against A.H. Robins could not be

estimated or a dispute resolution facility established unless all

Dalkon Shield claims were physically consolidated in one

furum. See 44a-46a. But that proved to be an illusion; it is

undisputed that (1) no cases were ever actually transferred in

the Robins bankruptcy and (2) the lack of such a transfer had

not a whit of impact on the district court’s ability to estimate

the value of the Dalkon Shield claims and resolve the

bankruptcy by establishing a claims resolution facility. Thus,

to the extent the Fourth Circuit in Robins spoke in terms that

would stretch the boundaries of § 157(b)(5) to achieve a

policy goal, it has since become clear that the attainment of

that goal is unrelated to any purported need to transfer cases.

Estimation and liquidation of pending tort claims are two

different things, and only the former need occur in the

centralized bankruptcy forum. Even more clearly, it is

wholly unnecessary to have claims against nondebtors

transferred.

18

In short, the correct reading of 28 U.S.C. § 157(b)(5)

is a further question of moment adding measurably to the

reasons for granting the writ.

CONCLUSION

This petition for a writ of certiorari should be

granted.

Respectfully submitted,

Marvin E. Frankel

(Counsel of Record)

Kenneth H. Eckstein

Jeffrey S. Trachtman

Kramer, Levin, Naftalis & Frankel

919 Third Avenue

New York, New York 10022

(212) 715-9100

Attorneys for the Official Committee

of Tort Claimants

July 1997

KL3:181218.1

APPENDIX

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UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT

Argued April 24, 1997 Decided May 8, 1997

Nos. 96-2005, 96-2008 to 96-2013 and %6-2139.

In re DoW CORNING CORPORATION,

Debtor.

HEIDI LINDSEY, Representative of the Estate of Charlotte

Mahum and Cheryl Kahn, et al., UNSECURED

CREDITORS’ COMMITTEE OFFICIAL COMMITTEE OF

TORT CLAIMANTS, et al.,

Plaintiffs-Appellees,

lit bies

THE Dow CHEMICAL COMPANY (96-2005/2139); CORNING

INCORPORATED (96-2008/2139); Dow CORNING

CORPORATION (96-2009); MINNESOTA MINING AND

MANUFACTURING COMPANY (96-2010); BAXTER

HEALTHCARE CORPORATION (96-2011); MEDICAL

ENGINEERING CORPORATION (96-2012); BRISTOL-

MYERS SQUIBB COMPANY (96-2013),

Defendants-Appellants.

2a

Randall L. Frank, Bay City, MI, Karen E. Evangelista,

Shermeta, Chimko & Kilpatrick, Rochester Hills, MI, Dennis

S. Meir, Kilpatrick & Cody, Atlanta, GA, Susan M. Cook,

Lambert, Leser, Dahm, Giunta, Cook & Schmidt, Bay City,

MI, Marion J. Mack, Trustee, Office of the United States

Trustee, Detroit, MI, Marvin E. Frankel (argued and briefed),

Kramer, Levin, Naftalis, Nessin, Kamin & Frankel, New York

City, Lenard M. Parkins, Verner, Liipfert, Bernard, McPher-

son & Hand, Houston, TX, Russell Langford Munsch, Mun-

sch, Hardt, Kopf, Harr & Dinan, Dallas, TX, John M.

O’ Quinn, O’ Quinn, Kerensky, McAnnich & Laminack, Hous-

ton, TX, Deborah H. Sheffield, Richardson, Plowden, Grier &

Howser, Columbia, SC, Christopher J. Walker, Markow,

Walker, Reeves & Anderson, Ridgeland, MS, Delia Y. Robin-

son, Markow, Walker, Reeves & Anderson, Jackson, MS,

Thomas D. Lambros, Bricker & Eckler, Cleveland, OH, Debra

D. McCullough, Sherman & Sterling, New York City, Tommy

Jacks, Mithoff & Jacks, Austin, TX, Edward Blizzard,

Williams, Blizzard & McCarthy, Houston, TX, for Tort

Claimant, Official Committee of Tort Claimants in No. 96-

2005.

James C. Schroeder (briefed), Theresa A. Canaday

(briefed), Herbert L. Zarov, Robert M. Dow, Jr., Mayer,

Brown & Platt, Chicago, IL, for Dow Chemical Company in

Nos. 96-2005 and 96-2139.

Dennis S. Meir, Kilpatrick & Cody, Atlanta, GA, Marvin E.

Frankel (argued and briefed), Kramer, Levin, Naftalis, Nessin,

Kamin & Frankel, New York City, Russell Langford Munsch,

Munsch, Hardt, Kopf, Harr & Dinan, Dallas, TX, John M.

O’ Quinn, O’ Quinn, Kerensky, McAnnich & Laminack, Hous-

ton, TX, Deborah H. Sheffield, Richardson, Plowden, Grier &

Howser, Columbia, SC, Christopher J. Walker, Markow,

Walker, Reeves & Anderson, Ridgeland, MS, Delia ‘Y. Robin-

son, Markow, Walker, Reeves & Anderson, Jackson, MS, for

Tort Claimant, Official Committee of Tort Claimants in

Nos. 96-2008 to 96-2013.

3a

Sheryl L. Toby, Michael J. Friedman, Honigman, Miller,

Schwartz & Cohn, Detroit, MI, Ogden N. Lewis, Davis, Polk

& Wardwell, New York City, for Unsecured Creditors’ Com-

mittee in Nos. 96-2008 to 96-2013.

William D. Eggers, Nixon, Hargrave, Devans & Doyle,

Rochester, NY, for Corning Incorporated in Nos. 96-2008 and

96-2139.

Barbara J. Houser (argued), George H. Tarpley, Sheinfeld,

Maley & Kay, Dallas, TX, for Dow Corning Corporation in

No. 96-2009.

Greg A. Danilow (briefed), Bruce R. Zirinsky (argued and

briefed), Howard B. Comet (briefed), Weil, Gotshal &

Manges, New York City, Susan Healy Zitterman, John P.

Hessburg, Kitch, Drutchas, Wagner & Kermey, Detroit, MI,

for Minnesota Mining and Manufacturing Company in

No. 96-2010.

Larry J. Nyhan, James F. Conlan, Sidley & Austin,

Chicago, IL, Judy A. O’Neill, Laura J. Eisele, Dylrema Gos-

sett, Detroit, MI, Thomas E. Pitts, Jr. (argued and briefed),

Sidley & Austin, New York City, for Baxter Healthcare Cor-

poration in No. 96-2011.

Hayden Smith, Jr. (briefed), David J. Adler, McCarter &

English, Newark, NJ, for Medical Engineering Corporation

in No. 96-2012.

Hayden Smith, Jr. (briefed), David J. Adler, McCarter &

English, Newark, NJ, for Bristol-Myers Squibb Company in

No. 96-2013.

Michael J. Friedman, Honigman, Miller, Schwartz & Cohn,

Detroit, MI, Randall L. Frank, Bay City, MI, Karen E. Evan-

gelista, Shermeta, Chimko & Kilpatrick, Rochester Hills, MI,

Dennis S. Meir, Kilpatrick & Cody, Atlanta, GA, Susan

M. Cook, Lambert, Leser, Dahm, Ginata, Cook & Schmidt,

Bay City, MI, Marion J. Mack, Trustee, Office of the United

States Trustee, Detroit, MI, Marvin E. Frankel (argued and

briefed), Kramer, Levin, Naftlis, Nessin, Kamin & Frankel,

New York City, Lenard M. Parkins, Verner, Liipfert, Bernard,

McPherson & Hand, Houston, TX, Russell Langford Munsch,

Munsch, Hardt, Kopf, Harr & Dinan, Dallas, TX, John M.

4a

O’ Quinn, O’ Quinn, Kerensky, McAnnich & Laminack, Hous-

ton, TX, Deborah H. Sheffield, Richardson, Plowden, Grier &

Howser, Columbia, SC, Delia Y. Robinson, Markow, Walker,

Reeves & Anderson, Jackson, MS, Thomas |. Lambros,

Bricker & Eckler, Cleveland, OH, Debra D. McCullough,

Sherman & Sterling, New York City, Tommy Jacks, Mithoff

& Jacks, Austin, TX, Edward Blizzard, Williams, Blizzard

& McCarthy, Houston, TX, for Tort Claimant, Official Com-

mittee of Tort Claimants in No. 96-2139.

Ogden N. Lewis, Davis, Polk & Wardwell, New York City,

for Unsecured Creditors’ Committee in No. 96-2139.

Before: MARTIN, Chief Judge; BATCHELDER, Circuit Judge;

WISEMAN,* District Judge.

BOYCE F. MARTIN, JR., Chief Judge.

Before the Court is an appeal and petition for writ of man-

damus by Dow Corning; its shareholders, The Dow Chemical

Company and Corning Incorporated; and other manufacturers

of silicone products that have been named as co-defendants

with Dow Corning in product liability suits relating to sili-

cone implants.' These parties contest the district court’s

denial of their motion to transfer to the Eastern District of

Michigan breast-implant claims brought in various jurisdic-

tions by claimants who have chosen not to join the global set-

tlement pool. The district court, upon remand from this Court,

exercised discretionary and mandatory abstention in declin-

° The Honorable Thomas A. Wiseman, Ir., United States District

Judge for the Middle District of Tennessee, sitting by designation.

: These co-defendants include Baxter International Inc. (Baxter);

Minnesota Mining and Manufacturing (3M); Bristol-Myers Squibb Co.

(Bristol-Myers); and Medical Engineering Corp. (MEC).

- | —

Sa

ing to transfer the claims against the shareholders and the co-

defendants. For the reasons stated herein, we issue a writ of

mandamus ordering the district court to transfer the claims

against the shareholders to the Eastern District of Michigan

and to evaluate each claim individually to determine whether

mandatory abstention applies.

This case concerns yet another chapter in “one of the

world’s largest mass tort litigations.” In re Dow Corning

Corp., 86 F.3d 482, 486 (6th Cir.1996), cert. denied, __ US.

—__, 117 S.Ct. 718, 136 L.Ed.2d 636 (1997). Thousands of

product liability claims arising from Dow Corning’s manu-

facture and sale of silicone products have been filed against

Dow Corning and its shareholders. The threatened conse-

quences of these claims prompted Dow Corning to file a peti-

tion for reorganization under Chapter 11 of the Bankruptcy

Code. Dow Corning, joined by its shareholders, subsequently

filed a motion to transfer the claims pending against them to

the Eastern District of Michigan. The company envisioned its

motion was the first step in ensuing a feasible plan of reor-

ganization, and indicated that it would seek to have the trans-

ferred actions consolidated for a threshold jury trial on the

issue of whether silicone gel breast implants cause the

diseases claimed.” Id. at 486. Citing potential claims for con-

tribution against Dow Corning, the nondebtor manufactur-

ers—Baxter, 3M, Bristol-Myers; and MEC—also moved to

transfer the claims in which they were named as co-defen-

dants with Dow Corning. The district court granted Dow

Corning’s motion to transfer, but denied, on jurisdictional

grounds, the motion as it related to the shareholders and the

motions of the nondebtor manufacturers.

In In re Dow Corning Corp., 86 F.3d at 482, this Court

reversed and held that the Eastern District of Michigan had

“related to” jurisdiction over breast-implant claims against

not only the debtor, Dow Corning, but also its shareholders

and certain other nondebtor defendants. We further held that

28 U.S.C. § 157(b)(5) granted the district court authority

to transfer the cases against the nondebtors to the Eastern

District of Michigan. In so doing, we recognized the interest

6a

of all parties, including the tort claimants, in preventing

unnecessary depletion of Dow Corning’s assets. We further

acknowledged that the risk to the debtor’s estate would be

substantially enhanced “if the claims against Dow Chemical

and Corning Incorporated are allowed to proceed separately”

from those against Dow Corning. Id. at 495. After outlining

the risks to Dow Corning’s estate, we remanded to the district

court with instructions “to determine in each individual case

whether hearing it would promote or impair efficient and fair

adjudication of bankruptcy cases.” Id. at 497 (quoting In re

Salem Mortgage Co., 783 F.2d 626, 635 (6th Cir.1986)).

Despite our clear articulation of the risks to Dow Corning’s

estate and our call for individualized abstention determina-

tions, the district court, without benefit of a hearing and with-

out analysis of any individual claim, globally abstained from

the cases against the shareholders.

The Official Committee of Tort Claimants initially contend

that we are without jurisdiction to review the district court’s

decision. Indeed, Congress has significantly curtailed the

couris of appeals’ ability to review a district court’s decision

to exercise mandatory or discretionary abstention under 28

U.S.C. 1334(c)(1), (2). Section 1334(d) provides:

Any decision to abstain or not to abstain made under this

subsection (other than a decision not to [exercise manda-

tory abstention]) is not reviewable by appeal or other-

wise by the court of appeals under section 158(d), 1291,

or 1292 of this title or by the Supreme Court of the

United States under section 1254 of this title... .

28 U.S.C. § 1334(d). However, we conclude for two reasons

that we have jurisdiction in mandamus to review the district

court’s decision.

First, this is not the ordinary situation in which the district

court, either on motion of a party or on its own motion, deter-

mines that abstention under 28 U.S.C. § 1334(c) is appro-

priate. Rather, the district court was instructed by this Court,

in an order remanding this matter for the explicit purpose of

determining whether abstention was proper, to undertake a

Ta

case-by-case review of these tort claims and to determine, as

to each case, whether to abstain. The district court did not

comply with our order of remand. The issuance of a writ of

mandamus is therefore necessary and appropriate to require

the district court to conduct the abstention analysis in strict

compliance with the requirements of § 1334 and our order of

remand.

Second, § 1334(d) does not mention this Court’s ability to

review such determinations pursuant to our mandamus author-

ity under 28 U.S.C. § 1651. Thus, recognizing the familiar

maxim “expressio unius est exclusio alterius”—i.e., the

expression of one is the exclusion of others—we conclude

that our power to review a district court’s abstention deter-

mination under 1334(c)(1) or (2), other than a decision not to

abstain under 1334(c)(2), is limited to those rare cases when

mandamus review is justified; that is, when the case “ ‘pre-

sents questions of unusual importance necessary to the eco-

nomical and efficient administration of justice.’ EEOC v.

K-Mart Corp., 694 F.2d 1055 (6th Cir.1982). Because of the

significant risk posed to Dow Corning’s estate by the multi-

forum breast-implant litigation, this case is one of those rare

instances where mandamus relief is appropriate.

In In re Bendectin Prods. Liab. Litig., 749 F.2d 300, 304

(6th Cir.1984), we identified criteria for judging whether

issuance of a writ of mandamus is appropriate. These guide-

lines include: (1) the party seeking mandamus will be dam-

aged or prejudiced and has no other means of obtaining relief;

(2) the district court’s error is clearly erroneous as a matter of

law; (3) the district court’s order is an oft-repeated error; and

(4) the district court’s order raises important issues of first

impression. Id.; see also In re Glass, Molders, Pottery, Plas-

tics & Allied Workers Int’] Union, Local No. 173, 983 F.2d

725, 727 (6th Cir. 1993). Although all of the factors may not

point toward issuance of a writ, mandamus relief is still

appropriate “if the other factors clearly warrant it.” In re

Glass Workers, 983 F.2d at 727. In this case, the balance of

these factors indicate that issuance of a writ of mandamus is

appropriate.

8a

The first and fourth factors are clearly met. Dow Corning

and its shareholders will be harmed if the writ is not issued,

and § 1334(d)’s direct appeal prohibition renders a writ of

mandamus their only avenue of relief. This case also presents

extremely important issues that have not been addressed by

this Court.

Moreover, the district court’s clear error is equally appar-

ent. The order of remand required the district court to make a

case-by-case determination of whether, in light of the findings

contained in the order of remand, abstention was statutorily

mandated or appropriate as a matter of discretion, and Dow

Corning and its shareholders were entitled to have that order

followed. Instead, completely disregarding those findings, the

district court made a blanket determination that mandatory

abstention under § 1334(c)(2) was appropriate, and in the

alternative, held that it would exercise discretionary absten-

tion to avoid transfer of the shareholders’ claims to the East-

ern District of Michigan. Both determinations were fraught

with clear error.

The mandatory abstention provision in § 1334(c)(2) pro-

vides:

Upon timely motion of a party in a proceeding based

upon a State law claim or State law cause of action,

related to a case under title 11 but not arising under title

11 or arising in a case under title 11, with respect to

which an action could not have been commenced in a

court of the United States absent jurisdiction under this

section, the district court shall abstain from hearing such

proceeding if an action is commenced, and can be timely

adjudicated, in a State forum of appropriate jurisdiction.

Thus, for mandatory abstention to apply to a particular pro-

ceeding, there must be a timely motion by a party to that pro-

ceeding, and the proceeding 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

appropriate jurisdiction; (4) be capable of timely adjudica-

|

9a

tion; and (5) be a non-core proceeding. In re Dow Corning, 86

F.3d at 497.

The district court’s decision applying mandatory abstention

to the proceedings against the shareholders is, in generous

terms, inadequate. The requirements for mandatory abstention

dictate that each case must be examined individually. The dis-

trict court, in its three-page discussion of mandatory absten-

tion, failed to make the necessary case-by-case inquiry. No

hearing was conducted, and no evidence was accepted by the

district court. It is undisputed that some of the cases do not

meet the requirements of mandatory abstention. Indeed, in

many of the cases, there does not even appear to have been a

motion for abstention filed by the plaintiff in the proceéding.

Moreover, the number of cases requiring mandatory absten-

tion is impossible for us to determine because of the paucity

of evidence on the record. Thus, the district court’s decision

employing § 1334(c) to abstain globally without examination

of a single individual claim cannot stand.

The district court’s exercise of discretionary abstention is

equally troubling. Section 1334(c)(1) provides, in relevant

part:

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.

28 U.S.C. § 1334(c)(1).

As an initial matter, it makes little practical sense to trans-

fer the claims against Dow Corning while refusing to transfer

those against the shareholders. The claims against the share-

holders arise from an identical set of facts and are merely

duplicates of those against Dow Corning. The shareholders

have never manufactured a silicone-implant product and are

only named in the suits because of their association with Dow

Corning. Thus, the actions against Dow Corning’s share-

holders are essentially the same exact cases that have already

10a

been transferred to the Eastern District of Michigan. The dis-

trict court’s decision to transfer only the claims against Dow

Corning basically expanded an already overwhelming liti-

gation burden.

Aside from the impracticality of the district court’s decision

to exercise discretionary abstention, its legal rationale is

wholly inadequate. The district court did not examine a sin-

gle tort claim to determine whether discretionary abstention

was appropriate in the interests of justice and comity. The dis-

trict court briefly mentioned principles of federalism and

comity, as well as the state law nature of the claims, as bases

for discretionary abstention. Although the cases are premised

on state law, the district court did not indicate why the state

law nature of the claims justified discretionary abstention;

indeed, it appears that it does not. The district court ignored

the fact that at least some of the claims have an independent

basis for jurisdiction in federal court. Moreover, there is no

suggestion that the state law issues in these cases are unique,

unsettled, or difficult. See General Am. Communications

Corp. v. Landsell (In re General Am. Communications Corp.),

130 B.R. 136, 146 (S.D.N.Y.1991) (“Given the genesis of sec-

tion 1334(c)(1), it is not surprising that the primary deter-

minant for the exercise of discretionary abstention is whether

there exists unsettled questions of state law.”); see also In re

Pan Am. Corp., 950 F.2d 839, 845 (2d Cir.1991). Thus, the

principles of federalism and comity would not be violated by

the district court’s assumption of jurisdiction over these

cases. The breast implant litigation truly is a nationwide

issue, and no state has a paramount interest in the litigation.

The district court also overlooked the risks to Dow Corn-

ing’s estate that were clearly articulated in our prior decision.

Failing to transfer the claims against the shareholders will

likely affect the size of the estate and the length of time the

bankruptcy proceedings will be pending, as well as Dow

Corning’s ability to resolve its liabilities and proceed with

reorganization. As we noted in In re Dow Corning Corp., 86

F.3d 482, 493 (6th Cir.1996), cert. denied, ___—s—-U.S.__, 117

lla

S.Ct. 718, 136 L.Ed.2d 636 (1997), “Dow Chemical and

Corning Incorporated have already asserted cross-claims

against each other and Dow Corning in the underlying liti-

gation.” Moreover, the shareholders share joint insurance cov-

erage with Dow Corning. We acknowledged in our prior

decision that “certain of the policies cover defense expenses,

and those costs alone may significantly reduce the pool of

coverage available to Dow Corning if the claims pending

against Dow Chemical and Corning Inc. are allowed to pro-

ceed separately. “ Id. at 495. Therefore, contrary to the dis-

trict court’s determination, the substantial risks identified in

our prior decision indicate that the cases against the share-

holders should be transferred in the interest of justice.

The district court, without a hearing or the presentation of

additional evidence, ignored this Court’s examination of the

evidence and made a conclusory finding to the contrary. We

nevertheless find that our prior examination of the record was

correct and that the district court’s determinations are with-

out support. Thus, because the district court clearly erred in

making its abstention determinations, issuance of a writ of

mandamus is appropriate in this case.”

We further find that discretionary abstention from the cases

against the shareholders is wholly inappropriate in this case.

In our prior decision, we acknowledged the significant impact

that our resolution of these issues will have on the future

course of this litigation. We also recognized that perfect sat-

isfaction of all interests was impossible. Armed with that real-

ization, we set out to meet the goal of establishing “a

mechanism for resolving the claims at issue in the most fair

and equitable manner possible.” Id. at 487. This goal was

2 The district court also relied on 11 U.S.C. § 524(e) to justify its

decision to exercise discretionary abstention. This reliance is puzzling.

Section 524(e) provides that the liability of a nondebtor is not affected

by the discharge of that liability with respect to the debtor. No nondebtor

is seeking a discharge of their debt in the Eastern District of Michigan,

and no nondebtor has argued that a discharge of the debtor’s debts should

have any affect on their objigations or liabilities to the claimants in these

cases. Thus, § 524 is completely irrelevant to this case.

12a

to be attained by balancing the following often-competing

interests:

those of the individuals who have brought and will bring

breast implant claims; Dow Corning’s interests with

regard to its attempt to formulate a successful reorga-

nization plan; Dow Chemical and Corning Incorporated’s

interests as shareholders of Dow Corning; and the judi-

cial system’s interest in allocating its limited resources

effectively and efficiently.

Id.

The latter three interests clearly will be served by trans-

ferring the claims against the shareholders to the Eastern Dis-

trict of Michigan. The claimant’s interests—presumably

preserving the assets of Dow Corning’s estate and receiving

quick adjudication of their claims—will also be accomplished

through such a transfer. Thus, with regard to the cases brought

by claimants choosing not to join the global settlement pool,

we have reached a crossroads. Dow Corning’s assets are finite

and risk being unnecessarily diminished by the expense of lit-

igating thousands of breast-implant claims in innumerable

jurisdictions. We therefore believe that transferring these

claims to a single jurisdiction is the only way to achieve an

efficient resolution to this litigation, the development of a

successful reorganization plan, and the adequate compensa-

tion of deserving claimants.

Accordingly, we issue a writ of mandamus ordering the dis-

trict court to transfer the claims against Dow Chemical and

Corning Incorporated to the Eastern District of Michigan.

Once transfer has been accomplished, the cases should be

indexed and cross referenced so that, in any proceeding in

which a motion for abstention is filed, the district court may

make the required abstention determinations and adequately

state its reasoning as to each such proceeding. Because we

find it unnecessary to transfer any other pending proceedings

to the district court at this time, we deny the nondebtor man-

ufacturers’ petition for writ of mandamus.

Oe

13a

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF MICHIGAN

SOUTHERN DIVISION

Case No. 95-CV-72397-DT

In Re:

Dow CORNING CORPORATION,

Debtor.

HON. DENISE PAGE Hoop

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. Jn 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 defen-

dants pursuant to 28 U.S.C. § 157(b)(5). The Sixth Circuit

reversed this Court’s determination on this issue and found

14a

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).

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, Corn-

ing Incorporated, Minnesota Mining, Baxter, and Bristol-

Myers Squibb in nonbankruptcy forums nationwide. /n re

Dow Corning Corp., supra at 494. In a section 157(b)(5)

motion, an abstention analysis is required. Jn re Pan Ameri-

can 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. Jn 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). /¢. Mandatory

abstention will be addressed first.

In order for mandatory abstention to apply, a proceeding

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 appropriate jurisdiction, 4) be

15a

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 jurisdiction over the

nondebtors. The personal injury tort actions against the non-

debtors 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 jurisdiction over the actions against the

nondebtors.' With respect 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 Litigation 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 pro-

ceedings. There are two categories of core proceedings:

proceedings “arising under” title 11 and proceedings “arising

in” title 11. In re Harris Pine Mills, 44 F.3d 1431, 1435 (9th

; 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 autside of the Eastern Dis. —- — ~-~~~ ~- -,

trict of Michigan.

16a

Cir. 1995), cert. denied, 115 S.Ct. 2555 (1995). Proceedings

“arising under” title 11 “involve a cause of action created or

determined by the statutory provision of title 11.” Jd. Pro-

ceedings “arising in” title 11 are a reference to those “admin-

istrative” matters that arise only in bankruptcy cases and are

not based on any right expressly created by title 11, but nev-

ertheless, would have no existence outside of the bankruptcy.

Id. Section 157(b)(2) provides a nonexclusive list of pro-

ceedings 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 out-

side of bankruptcy.” /d.

Personal injury tort or wrongful death claims are excluded

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 disallowance of claims against the

estate or exemptions from property of the estate, and

estimation of claims or interests for the purposes of con-

firming a plan under chapter 11, 12, or 13 of title 11 but

not the liquidation or estimation of contingent or unliq-

uidated personal injury tort or wrongful death claims

against the estate for purposes of distribution in a case

under title 11;

*x *” *x

(O) other proceedings affecting the liquidation of

assets of the estate or the adjustment of the debtor-cred-

itor or the equity security holder relationship, except per-

sonal injury tort or wrongful death claims.

28 U.S.C. § 157(b)(2)(B) and (O) (emphasis added). /n re

Hughes, 98 B.R. 115, 118 (D.C. 1988). The actions against

-— —- ~- —~-+thenondebtordefendants-are non-core proceedings under2& _ __

U.S.C. § 157.

17a

Section 157(b)(4) provides that “[n]on-core proceedings

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 Section 1334(c\(2).” In

re Pan Am, 950 F.2d at 845; 28 U.S.C. § 157(b)(4). As indi-

cated above, the non-core proceedings included in Section

157(b)(2)(B) are “liquidation 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.” (Emphasis added). Here, the personal injury and/or

wrongful 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) provides for mandatory

abstention in cases involving state law claims for which the

sole basis of bankruptcy jurisdiction is “related to” jurisdic-

tion. Celotex Corp. v. Edwards, 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” jurisdiction over the actions pending against the non-

debtors in nonbankruptcy forums nationwide. In re Dow

Corning, 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 remand

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:

18a

. . . federal courts should be hesitant to exercise juris-

diction when state issues substantially predominate,

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

raised, or of the comprehensiveness of the remedy

sought.

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

claims against the nondebtors are predominantly state law

claims. The proof and scope of issues in dispute and the com-

prehensiveness 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 fed-

eral judge, . . . at least judicial economy and expedi-

tiousness, may depend on the court’s authority to refer

cases to other courts. Since the 1984 Bankruptcy 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 interest of

justice and comity. Waiting until the estimation and confir-

mation of a plan of reorganization before the actions against

the nondebtors are liquidated would not result in a more pre-

cise estimation of the assets needed by the debtor’s estate to

cover any indemnification and contribution claims against the

debtor’s estate. The estimation of any possible indemnifica-

tion 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 contrary, as the various trials proceed against the non-

debtors, 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_loint_Insnrance_ ___.

issue between Dow Corning, Dow Chemical and Corning

19a

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

diction based on the Joint Insurance between the parties. The

Sixth Circuit opinion does not address the Joint Insurance

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 dis-

cretionary abstention. Although Dow Chemical 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 Chem-

ical has sufficient primary 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 suffi-

cient 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 poli-

cies with indemnification contracts, a nondebtor should not be

shielded by the powers of the bankruptcy court. Jd. at 760-

761. The Bankruptcy 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 dis-

charge 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 abstention. Specifically, the Court finds the

interests of justice and comity weigh in favor of discretionary

abstention.

—- — = —_———— -— —- - ~~

20a

III. 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 nondebtor

defendants are subject to mandatory abstention under 28

U.S.C. § 1334(c)(2); alternatively,

IT 1S ORDERED that the Court will exercise its discretion to

ABSTAIN from the cases against the nondebtors under 28

U.S.C. § 1334(c)(1).

DATED: JUL 30 1996

/s/ DENISE PAGE HOOD

DENISE PAGE Hoop

United States District Judge

2la

UNITED STATES COURT OF APPEALS,

SIXTH CIRCUIT.

Nos. 95-2034, 95-2082, 95-2084,

95-2106, and 95-2107.

Argued March 5, 1996.

Decided April 9, 1996.

In re DoW CORNING CORPORATION,

Debtor.

HEIDI LINDSEY, et al.: Official Committee

of Tort Claimants, et ai.,

Plaintiffs-Appellees,

—_—vV.—

O’ BRIEN, TANSKI, TANZER AND YOUNG HEALTH

CARE PROVIDERS OF CONNECTICUT, et al.,

Defendants,

Dow Corning Corporation; The Dow Chemical Company (95-

2034/2107); Corning Inc. (95-2107); Baxter Healthcare

Corporation; Baxter International Inc. (95-2082); Min-

nesota Mining and Manufacturing Co. (95-2084); Bristol-

Myers Squibb Co.; Medical Engineering Corporation (95-

2106),

Defendants-Appellants.

22a

Before:

MARTIN and BATCHELDER, Circuit Judges

WISEMAN, District Judge.*

AMENDED OPINION

BOYCE MARTIN, JR., Circuit Judge.

This is an appeal to determine the subject matter jurisdic-

tion of federal district courts, sitting as bankruptcy courts,

over proceedings “related to” a case filed under Chapter 11 of

the Bankruptcy Code, and the ability of federal district courts

to transfer such proceedings to the district court in which the

bankruptcy case is pending. The principal issue presented is

whether the district court erred, as a matter of law, in its

determination that claims for compensatory and punitive dam-

ages asserted in tens of thousands of actions against numer-

ous nondebtor manufacturers and suppliers of silicone gel

breast implants could have no conceivable effect upon, and

therefore were not related to, the bankruptcy estate of The

Dow Corning Corporation. The district court held that it did

not have “related to” jurisdiction over those claims pursuant

to 28 U.S.C. § 1334(b) and concluded that they could not be

transferred to it pursuant to 28 U.S.C. § 157(b)(5). For the

following reasons, we REVERSE and REMAND for further pro-

ceedings consistent with this opinion.!

The Honorable Thomas A. Wiseman, Jr., Senior United States

District Judge for the Middle District of Tennessee, sitting by desig-

nation.

In this amended opinion, we adhere to our April 9, 1° 96 deci-

sion in this case, but seek to clarify the scope of our ruling and the

impact we intend it to have. The opinion is therefore amended and reis-

sued as follows,

23a

I.

Until it ceased their manufacture in 1992, Dow Corning

was the predominant producer of silicone gel breast implants,

accounting for nearly 50% of the entire market. In addition,

Dow Corning supplied silicone raw materials to other man-

ufacturers of silicone gel breast implants. In recent years, tens

of thousands of implant recipients have sued Dow Corning,

claiming to have been injured by autoimmune reactions to the

silicone in their implants. Dow Chemical Company, Corning

Incorporated, Minnesota Mining and Manufacturing Com-

pany, Baxter Healthcare Corporation and Baxter International

Incorporated,” and Bristol-Myers Squibb Company and Med-

ical Engineering Corporation? are other manufacturers and

suppliers of silicone gel-filled implants, and are codefendants

with Dow Corning in a large number of personal injury

actions.

On June 25, 1992, prior to Dow Corning’s filing of its

Chapter 11 petition, the Federal Judicial Panel on Multidis-

trict Litigation ordered the consolidation of all breast implant

actions pending in federal courts for coordinated pretrial pro-

ceedings, and transferred those actions to Chief Judge Pointer

of the Northern District of Alabama. On September 1, 1994,

Chief Judge Pointer certified a class for settlement purposes

only, and approved a complex agreement between members of

the class and certain defendants that contemplated the cre-

ation of a $4.25 billion fund to cover, among other things, the

costs of treatment and other expenses incurred by breast

implant recipients. Each class member was given the oppor-

tunity to opt out of the class and to pursue her individual

claims separately. Several thousand plaintiffs opted out of the

Baxter never designed, manufactured, or marketed breast

implants, but is a defendant in personal injury actions as a result of cer-

tain corporate acquisitions and mergers. The Baxter implants were actu-

ally made by The Heyer-Schulte Company.

3 ‘The Bristol-Myers Squibb implants were made by a subsidiary,

The Medical Engineering Corporation.

—— eee... TY el

24a

settlement class, while approximately 440,000 elected to reg-

ister for inclusion in the Global Settlement.‘

Due to the litigation burden imposed by what is one of the

world’s largest mass tort litigations, and the threatened con-

sequences of the thousands of product liability claims arising

from its manufacture and sale of silicone breast implants and

silicone gel, Dow Corning filed a petition for reorganization

under Chapter 11 of the Bankruptcy Code on May 15, 1995,

in the United States District Court for the Eastern District of

Michigan. The district court had jurisdiction over that pro-

ceeding pursuant to 28 U.S.C. § 1334(a). As a result of Dow

Corning’s Chapter 11 filing, all breast implant claims against

it were automatically stayed pursuant to 11 U.S.C. § 362(a).

Claims against Dow Corning’s two shareholders, Dow Chem-

ical and Corning Incorporated, and the other nondebtor defen-

dants were not stayed. Dow Chemical, Corning Incorporated,

Minnesota Mining, Baxter and Bristol-Myers Squibb subse-

quently removed many opt-out claims in which those com-

panies were named defendants with Dow Corning from state

to federal court pursuant to 28 U.S.C. § 1452(a).

On June 12, 1995, Dow Corning filed a motion pursuant

to 28 U.S.C. § 157(b)(5)° to transfer to the Eastern District

of Michigan opt-out breast implant claims pending against

it and its shareholders, Dow Chemical and Corning Incorpo-

rated. Dow Corning’s motion covered claims that had been

It has since become clear that the original Global Settlement

will not hold together because the sums provided are inadequate to fund

the claims filed by over 100,000 plaintiffs. Unless a modified settle-

ment is reached, thousands of opt-in plaintiffs and thousands of

claimants who have yet to file actions are likely to file or reactivate

individual suits against the breast implant defendants in both state and

federal courts.

5 Title 28 U.S.C. § 157(b)(5) states: “The district court shall

order that personal injury tort and wrongful death claims shall be tried

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

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

the district court in which the bankruptcy case is pending.”

. Dow Corning’s motion sought a transfer of lawsuits against it

and its shareholders which were not part of the global settlement. Dow

25a

removed to federal court and were pending in the multidistrict

forum, as well as claims pending in state courts which were in

the process of being removed to federal courts pursuant to 28

U.S.C. § 1452(a). Dow Corning envisioned its transfer motion

as the first step in ensuring a feasible plan of reorganization,

and indicated that it would seek to have the transferred

actions consolidated for a threshold jury trial on the issue of

whether silicone gel breast implants cause the diseases

claimed. Dow Chemical and Corning Incorporated joined in

Dow Corning’s motion.

On June 14, 1995, Minnesota Mining, Baxter, and Bristol-

Myers Squibb also moved, pursuant to Section 157(b)(5), to

transfer to the Eastern District of Michigan the opt-out cases

in which those manufacturers, were named as defendants with

Dow Corning.’ In their Section 157(b)(5) motions, Minnesota

Corning Dow Chemical and Corning have stated that “[t]housancs of

the suits against Dow Corning have included claims against Dow Chem-

ical and Corning, even though neither of those companies designed,

manufactured, tested, or sold breast implants.” Brief for Dow Corning

Corporation, The Dow Chemical Company, and Corning Incorporated

at 9. The companies have explained that “[p]laintitfs have generally

alleged that the Shareholders are liable for Dow Corning’s acts because

they purportedly (1) negligently undertook Dow Corning’s duties in

connection with Dow Corning’s products, (2) aided and abetted Dow

Corning’s manufacture and sale of unsafe products, or (3) conspired

with Dow Corning in the sale by Dow Corning of unsafe or inade-

quately tested products.” Id. at 9-10. Dow Corning’s transfer motion

covered about one-third of the breast implant claims brought by opt-out

plaintiffs against Dow Corning.

' The Minnesota Mining, Baxter, and Bristol-Myers Squibb

motions were limited to personal injury actions in which Dow Corning

was a named codefendant with one or more of those parties and the

plaintiffs had opted out of the Global Settlement. According to Min-

nesota Mining, “when [Dow Corning] filed for chapter Il, [it] was a

codefendant with [Minnesota Mining] in approximately 75% of implant

cases against [Minnesota Mining]. . . [i]n virtually every case, plain-

tiffs asserted claims of joint and several liability against [Minnesota

Mining] and [Dow Corning] for the full amount of their asserted dam-

ages. Additionally, approximately 60% of the cases against [Minnesota

Mining] involved plaintiffs who had received multiple sets of breast

implants, in separate operations, including implants made by [Min-

nesota Mining] and at least one other manufacturer, which in most cases

26a

Mining, Baxter, and Bristol-Myers Squibb also asked the dis-

trict court to order that the claims at issue be transferred to

the district court in which the bankruptcy case is pending so

that the court could conduct a consolidated trial on the issue

of causation.

On September 12, 1995, the district court issued two opin-

ions and companion orders regarding the Section 157(b)(5)

transfer motions. With respect to opt-out breast implant cases

pending against Dow Corning, the district court asserted juris-

diction under Section 1334(b) and permitted transfer pursuant

to Section 157(b)(5). The district court, however, denied the

remainder of the transfer motions on the ground that, as a

matter of law, it lacked subject matter jurisdiction over the

claims sought to be transferred because they were not “related

to” Dow Corning’s bankruptcy proceeding pursuant to 28

U.S.C. § 1334(b). In denying the transfer motions, the district

court also directed that individual federal courts nationwide

dismiss or sever Dow Corning and/ or remand the combined

opt-out actions to state court, and enjoined the nondebtor

codefendants from removing any other cases from state to

federal court pursuant to 28 U.S.C. § 1452 if the only basis

for such removal was 28 U.S.C. § 1334(b) or 28 U.S.C.

§ 1367(a). In a September 14, 1995 order, the district court

extended its rulings to include opt-in breast implant claims

included [Dow Corning].” Brief for Minnesota Mining and Manufac-

turing Company at 6. The Baxter motion “covered personal injury

actions in which both the Debtor and Baxter were named defendants

and the plaintiff had opted out of the Global Settlement.” Brief for Bax-

ter Healthcare Corporation and Baxter International Inc. at 3. Baxter

has stated that the actions in which “both the Debtor and Baxter are

defendants number more than 5,000. . . in most of which the Debtor

and Baxter are alleged to be joint tortfeasors and jointly and severally

liable for the damages asserted.” Id. at 9. Bristol-Myers Squibb motion

explained that the company sought to have the district court transfer the

opt-out cases in which it was a named codefendant with Dow Corning.

Brief for Bristol-Myers Squibb Company and Medical Engineering Cor-

poration at 5. The Minnesota Mining, Baxter. and Bristol-Myers Squibb

motions covered approximately two-thirds of the breast implant claims

asserted by opt-out plaintiffs against Dow Corning.

rr reea tenet

+ pa neni cokaermiapegneg

27a

Dow Corning, Dow Chemical, Corning Incorporated, Min-

nesota Mining, Baxter, and Bristol-Myers Squibb subse-

quently filed appeals seeking review of the district court’s

partial denial of their motions to transfer. Those appeals were

consolidated on October 10, 1995, and we are now faced with

a complex set of questions pertaining to the scope of a district

court’s jurisdiction when it sits in bankruptcy, and its power

to fix venue for the trial of wrongful death and personal injury

tort claims that are “related to” a bankruptcy proceeding. In

addressing these issues, we begin, as we do in any case

involving a question of statutory construction, with the

express language of the statute at issue and an examination of

Congressional intent. In addition, we recognize that our deci-

sion will significantly impact the future course of this mas-

sive litigation. Realizing that we cannot satisfy all competing

interests perfectly, our primary goal is to establish a mecha-

nism for resolving the claims at issue in the most fair and

equitable manner possible. In seeking to achieve that goal, we

are called upon to balance four different, and frequently com-

peting, interests: those of the individuals who have brought

and will bring breast implant claims; Dow Corning’s interests

with regard to its attempt to formulate a successful reorga-

nization plan; Dow Chemical and Corning Incorporated’s

interests as shareholders of Dow Corning; and the judicial

System’s interest in allocating its limited resources effectively

and efficiently. |

II.

As a threshold matter, we must determine whether the dis-

trict court’s partial denial of the motions to transfer is imme-

diately appealable. These issues are certainly fluid. Our

general jurisdiction to review a decision or order of a district

court sitting in bankruptcy is governed by 28 U.S.C. § 1291.

A.H. Robins Co. v. Piccinin, 788 F.2d 994, 1009 (4th

Cir.1986), cert. denied, 479 U.S. 876, 107 S.Ct. 251, 93

L.Ed.2d 177 (1986) (“A.H. Robins Co. I’); In re Salem Mort-

gage Co., 783 F.2d 626, 629 n. 15 (6th Cir. 1986) (stating that

28a

Congress apparently assumed Section 1291 would be avail-

able for bankruptcy appeals because that provision was at one

time proposed to be the exclusive source of such jurisdiction).

Title 28 U.S.C. § 1291 permits appeals only from “final deci-

sions of the district courts.” This finality requirement is con-

sidered “in a more pragmatic and less technical way in

bankruptcy cases than in other situations.” Jn re Cottrell, 876

F.2d 540, 541-42 (6th Cir.1989)(citing In re Amatex Corp..,

755 F.2d 1034, 1039 (3d Cir.1985)). In bankruptcy cases, “a

‘functional’ and ‘practical’ application [of Section 1291] is to

be the rule.” A.H. Robins Co. I, 788 F.2d at 1009. The reason

for a more relaxed rule of appealability in bankruptcy cases

is that:

Bankruptcy cases frequently involve protracted pro-

ceedings with many parties participating. To avoid the

waste of time and resources that might result from

reviewing discrete portions of the action only after a

plan of reorganization is approved, courts have permit-

ted appellate review of orders that in other contexts

might be considered interlocutory.

Id. at 1009 (citations omitted). Therefore, where an order in

a bankruptcy case “finally dispose[s] of discrete disputes

within the larger case,” it may be appealed immediately. /n re

Saco Local Dev. Corp., 711 F.2d 441, 444 (1st Cir.1983). We

find that the district court’s order entered in bankruptcy sat-

isfies the finality requirement of Section 1291 for purposes of

appealability.

We also believe appealability of the district court’s order is

. sustainable under the collateral order doctrine of Cohen v.

Beneficial Indus. Loan Corp., 337 U.S. 541, 69 S.Ct. 1221, 93

L.Ed. 1528 (1949). Cohen holds that it is not always neces-

sary that a judgment terminate an action before an appeal may

be brought, and permits appellate review of decisions which

“finally determine claims of right separable from, and col-

lateral to, rights asserted in the action, too important to be

denied review and too independent of the cause itself to

require that appellate consideration be deferred until the

whole case is adjudicated.” Jd. at 546, 69 S.Ct. at 1225-26.

Daa eran i aa

29a

A collateral order is reviewable under Cohen when it: (1) con-

clusively determines the disputed question; (2) resolves an

important question completely separate from the merits of the

action; and (3) is effectively unreviewable on appeal from

final judgment. Pacor, Inc. v. Higgins, 743 F.2d 984, 988 (3d

Cir.1984) (citing Coopers & Lybrand v. Livesay, 437 U.S.

463, 468, 98 S.Ct. 2454, 2457-58, 57 L.Ed.2d 351 (1978)).

These three factors are equally fluid and are applied flexibly

in determining whether an order involving a bankruptcy pro-

ceeding is reviewable. Jn re Pan Am Corp., 16 F.3d 513, 515

(2d Cir.1994) (“In re Pan Am Corp. I’). Here we believe these

conditions have been satisfied on all grounds. The district

court’s order conclusively determines that claims pending

against the nondebtor defendants are not “related to” Dow

Corning’s bankruptcy proceeding for purposes of Section

1334(b). In addition, resolution of the “related to” jurisdic-

tional question does not involve consideration of the merits of

the pending tort claims. Finally, due to the unique circum-

stances of this case and the hardship that would inevitably

result if we were to refrain from addressing the issues pre-

sented by this appeal at this time, the issues presented will be

effectively unreviewable after a final judgment is rendered.

Because appellate jurisdiction exists, we turn to the ques-

tions on appeal.

ITI.

The first issue to be resolved is whether the district court

has subject matter jurisdiction over breast implant claims

pending not only against the debtor, Dow Corning, but also

over certain claims pending against the nondebtor defendants.

The nondebtor defendants argue that such jurisdiction exists

pursuant to 28 U.S.C. § 1334(b) or, alternatively, 28 U.S.C.

§ 1367(a). We review the district court’s jurisdictional ruling

de novo. In re Wolverine Radio Co., 930 F.2d 1132, 1138 (6th

Cir.1991) (citation omitted).

Section 1334 grants jurisdiction to district courts in

bankruptcy cases and proceedings as follows:

30a

(a) Except as provided in subsection (b) of this section,

the district court shall have original and exclusive juris-

diction of all cases under title 11.

(b) Notwithstanding any Act of Congress that confers

exclusive jurisdiction on a court or courts other than the

district courts, the district courts shall have original but

not exclusive jurisdiction of all civil proceedings arising

under title 11, or arising in or related to cases under

title 11.

28 U.S.C. § 1334 (emphasis added).

In addressing the extent of a district court’s bankruptcy

jurisdiction under Section 1334(b) over civil proceedings

“related to” cases under title 11, we start with the premise that

the “emphatic terms in which the jurisdictional grant is

described in the legislative history, and the extraordinarily

broad wording of the grant itself, leave us with no doubt that

Congress intended to grant to the district courts broad juris-

diction in bankruptcy cases.” In re Salem, 783 F.2d at 634.

Although “situations may arise where an extremely tenuous

connection to the estate would not satisfy the jurisdictional

| requirement” of Section 1334(b), Robinson v. Mich. Con-

sol. Gas Co., Inc., 918 F.2d 579, 584 (6th Cir.1990),

Congressional intent was “to grant comprehensive jurisdiction

to the bankruptcy courts so that they might deal efficiently

and expeditiously with all matters connected with the

bankruptcy estate.” Celotex Corp. v. Edwards, 115 S.Ct. 1493,

1499 (1995) (citations omitted).

The definition of a “related” proceeding under Section

1334(b) was first articulated by the Third Circuit in Pacor. As

stated in that case, the “usual articulation of the test for deter-

mining whether a civil proceeding is related to bankruptcy is

whether the outcome of that proceeding could conceivably

have any effect on the estate being administered in

bankruptcy.” Pacor, 743 F.2d at 994. An action is “related to

bankruptcy if the outcome could alter the debtor’s rights, lia-

bilities, options, or freedom of action (either positively or

negatively) and which in any way impacts upon the handling

nD

3la

and administration of the bankrupt estate.” Jd. A proceeding

“need not necessarily be against the debtor or against the

debtor’s property” to satisfy the requirements for “related to”

jurisdiction. Jd. However, “the mere fact that there may be

common issues of fact between a civil proceeding and a con-

troversy involving the bankruptcy estate does not bring the

matter within the scope of section [1334(b)].” Jd. (stating also

that “[jJudicial economy itself does not justify federal juris-

diction”). Instead, “there must be some nexus between the

‘related’ civil proceeding and the title 11 case.” Jd.

Our Circuit adopted the Pacor test for determining whether

a civil proceeding is “related to” a bankruptcy proceeding

under Section 1334(b) in Robinson, 918 F.2d at 583 (noting in

doing so that circuit courts have “uniformly adopted an

expansive definition of a related proceeding under section

1334(b)”). The majority of our sister circuits have likewise

adopted the Pacor test for “related to” jurisdiction. See Jn re

G.S.F. Corp., 938 F.2d 1467, 1475 (1st Cir.1991); In re Gard-

ner, 913 F.2d 1515, 1518 (10th Cir.1990); In re Lemco Gyp-

sum, Inc., 910 F.2d 784, 788 and n.19 (11th Cir.1990); Jn re

Fietz, 852 F.2d 455, 457 (9th Cir.1988); In re Wood, 825 F.2d

90, 93 (Sth Cir.1987); In re Dogpatch, U.S.A., Inc., 810 F.2d

782, 786 (8th Cir.1987); A.H. Robins Co. I, 788 F.2d at 1002

n. 11. According to the Supreme Court, the Second and Sev-

enth Circuits have adopted slightly different tests for deter-

mining whether Section 1334(b) jurisdiction exists. Celotex,

115 S.Ct. at 1499 n. 6 (citing UNR Indus., Inc. v. Continental

Casualty Co., 942 F.2d 1101, 1103 (7th Cir.1991), cert.

denied 503 U.S. 971 (1992) and In re Turner, 724 F.2d 338,

341 (2d Cir.1983)).

In addition, the Supreme Court recently cited Pacor with

approval in addressing the broad scope of the jurisdictional

grant in Section 1334(b). The Court stated:

Congress did not delineate the scope of “related to”

jurisdiction, but its choice of words suggests a grant of

some breadth. The jurisdictional grant in [Section]

1334(b) was a distinct departure from the jurisdiction

conferred under previous acts, which had been limited to

32a

either possession of property by the debtor or consent as

a basis for jurisdiction. We agree with the views

expressed by the Court of Appeals for the Third Circuit

in Pacor that “Congress intended to grant comprehensive

jurisdiction to the bankruptcy courts so that they might

deal efficiently and expeditiously with all matters con-

nected with the bankruptcy estate,” and that the “related

to” language of [Section] 1334(b) must be read to give

district courts (and bankruptcy courts under [Section]

157(a)) jurisdiction over more than simple proceedings

involving the property of the debtor or the estate.

Celotex, 115 S.Ct. at 1498-99 (citations omitted) (recogniz-

ing at the same time that a bankruptcy court’s jurisdiction

cannot be limitless). The Court also stated that proceedings

“related to” a bankruptcy proceeding include “suits between

third parties which have an effect on the bankruptcy

estate.” Jd. at 1499 n. 5 (citing 1 Collier on Bankruptcy

§ 3.01[1][c][iv], pp. 3-28 (15th ed.1994)). With these stan-

dards in mind, we turn to an examination of whether subject

matter jurisdiction exists pursuant to Section 1334(b) over

joint claims pending against Dow Corning and the various

nondebtor defendants.

In their briefs and at oral argument, Dow Corning, Dow

Chemical, Corning Incorporated, Minnesota Mining, Baxter

and Bristol-Myers Squibb proposed several theories for the

existence of Section 1334(b) subject matter jurisdiction over

certain breast implant claims pending against the nondebtor

defendants, no one of which has been clearly determined to

definitively confer “related to” jurisdiction under Section

1334(b). Specifically, the defendants argued that contingent

claims for contribution and indemnification, jointly-held

insurance policies,*® the possibility of collateral estoppel with

a corresponding increased exposure to liability, and the bur-

- den of defending against the overwhelming number of breast

implant claims all give rise to the possibility that the Dow

Corning estate will be seriously impacted if the claims at

. Dow Chemical and Corning Incorporated are co-insured with

Dow Corning under various liability policies.

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33a

issue, all of which to some degree affect the reorganization of

Dow Corning under Chapter 11, are permitted to proceed in

separate forums nationwide. We believe two of these theories

support a finding that the district court has “related to” juris-

diction over claims at issue, and address them in turn.

1. Claims for Contribution and Indemnification

Dow Corning, Dow Chemical and Corning Incorporated

argue that the district court erred in its determination that

“related to” jurisdiction does not exist over certain breast

implant claims asserted against Dow Chemical and Corning

Incorporated because, in addition to the claims asserted by the

personal injury claimants, Dow Chemical and Corning Incor-

porated have asserted cross-claims against each other and

Dow Corning in the underlying litigation, which will have an

effect on the bankruptcy estate.'!° Minnesota Mining, Baxter,

and Bristol-Myers Squibb argue that, despite the fact that they

have not yet filed contribution and indemnification claims or

proofs of claim relating to implant litigation in Dow Corn-

ing’s bankruptcy case, they have contingent claims for con-

tribution and indemnification that will have a conceivable

effect on the bankruptcy proceedings. Minnesota Mining,

Baxter, and Bristol-Myers Squibb therefore argue that the

breast implant claims covered by their Section 157(b)(5)

motions will give rise to thousands of claims against Dow

Corning for indemnification and contribution. In addition, the

nondebtor defendants claim that Dow Corning may itself have

claims against them for contribution and indemnification

’ In our original opinion, we addressed the two additional argu-

ments proffered by the movants in support of their assertion that

“related to” jurisdiction exists over claims pending against Dow Corn-

ing and the nondebtor defendants. Upon reconsideration, we believe our

finding that “related to” jurisdiction exists is best supported by the con-

tribution and indemnification and joint insurance theories.

10

According to Dow Corning, Dow Chemical, and Corning

Incorporated, the shareholders have asserted “thousands of cross-claims

for indemnity and contribution against Dow Corning in breast implant

suits.” (Brief for Dow Corning Corporation, The Dow Chemical Com-

pany, and Corning Incorporated at 21).

34a

under theories of joint and several liability. The companies

argue that these claims need to be resolved as part of Dow

Corning’s bankruptcy proceedings and reorganization plan,

and certainly will affect the debtor’s rights, liabilities,

options, and freedom of action in the administration of its

estate.

Relying on Pacor, the district court rejected this basis for

“related to” jurisdiction and held that the possibility of con-

tribution or indemnification should only be regarded as rel-

evant if and when judgments are actually entered against the

nondebtors. The district court stated:

In the instant case, as in Pacor, there will be no contin-

gent claim by the Shareholders against the debtor for

indemnification until such time as a judgment is ren-

dered and, then, the non-debtors would still have to pro-

ceed with an entirely separate proceeding in order to

obtain indemnification from the Debtor under 11 U.S.C.

§ 502.

Pacor involved John and Louise Higgins’ claim against the

Philadelphia Asbestos Co. (Pacor) in state court seeking dam-

ages allegedly caused by Mr. Higgins’ work-related exposure

to asbestos supplied by the company. In response, Pacor filed

a third-party complaint impleading the Johns-Manville Cor-

poration, which Pacor claimed was the original manufacturer

of the asbestos. After Johns-Manville filed for Chapter 11, a

dispute ensued as to whether the Higgins-Pacor action was

“related to” the Manville bankruptcy so that the entire con-

troversy could be removed to bankruptcy court. The Third

Circuit held that the primary Higgins-Pacor action would not

affect the Manville bankruptcy estate, and therefore was not

“related to” the bankruptcy proceedings. The court stated that

the Higgins-Pacor action was, “[a]t best, a mere precursor to

the potential third party claim for indemnification by Pacor

against Manville,” and held that, because all issues with

regard to Manville’s possible liability would be resolved in a

subsequent third party impleader action, “there would be no

automatic creation of liability against Manville on account of

a

BPR LAPEER Wt Sues Aaa ee GRE IME

Spt eRe tre

35a

a judgment against Pacor.” Pacor, 743 F.2d at 995 (stating

also that “[t]here would therefore be no effect on adminis-

tration of the estate, until such time as Pacor may choose to

pursue its third party claim”). Thus, the court in Pacor

viewed the absence of “automatic” liability on the part of the

debtor as dispositive in determining that Section 1334(b)

“related to” jurisdiction did not exist.

It has become clear following Pacor that “automatic”

liability is not necessarily a prerequisite for a finding of

“related to” jurisdiction. The Third Circuit itself has empha-

sized that:

A key word in [the] test is “conceivable.” Certainty, or

even likelihood, is not a requirement. Bankruptcy juris-

diction will exist so long as it is possible that a pro-

ceeding may impact on “the debtor’s rights, liabilities,

options, or freedom of action” or the “handling and

administration of the bankrupt estate.”

In re Marcus Hook Dev. Park Inc., 943 F.2d 261, 264 (3d

Cir.1991) (citation omitted).

Our Circuit has held that Section 1334(b) “does not require

a finding of definite liability of [an] estate as a condition

precedent to holding an action related to a bankruptcy pro-

ceeding.” In re Salem, 783 F.2d at 635. In Jn re Salem, our

Court reversed a district court’s determination that it lacked

Section 1334(b) subject matter jurisdiction over a proposed

settlement order entered by the bankruptcy court. Prior to

bankruptcy, Salem Mortgage Company and related debtor and

nondebtor corporations acted as mortgage brokers. Salem and

three related corporations filed voluntary petitions under

Chapter 11 and the bankruptcy court ordered the petitions of

the four debtors consolidated for administration. The Michi-

gan Attorney General subsequently filed an adversary pro-

ceeding against the debtors and eight other defendants. The

major parties in interest negotiated a stipulation for temporary

class certification and a proposed final consent judgment,

which was conditionally approved by the bankruptcy court.

The bankruptcy court eventually entered a Proposed Order

Approving Class Certification, Settlement of Class Action

36a

Litigation, and Entry of Consent Judgment. While reviewing

the proposed order, the district court raised the question of

whether it possessed “related to” subject matter jurisdiction

| over the adversary proceeding, and concluded it did not. Our

| Court reversed that determination stating:

The proposed order in this case provided that the plain-

tiff classes would release all claims against the debtors

arising from the mortgage transactions except for claims

concerning the alleged misappropriation of escrow

funds. The order also provided that the debtors pay civil

penalties under the Michigan Consumer Protection Act.

The corporations’ penalties are to be subordinated to the

claims of the general creditors. Resolution of the dis-

pute, moreover, will affect the liability of the debtors

to the investors. For example, to the extent the value of

the mortgages is reduced by their reformation, the

investors may have an action against the debtors such as

breach of the assignment agreement. Because of the

nature of these mortgage transactions, we hold that this

dispute is sufficiently related to the estate of the

bankrupt such that the district court had jurisdiction over

the subject matter.

Id. at 634. The Court stated that the case was distinguishable

from Pacor on the ground that a finding of definite liability

of an estate is not a prerequisite to holding an action “related

to” a bankruptcy proceeding, and because the parties in the

mortgage transactions in the proceeding at issue were “more

intertwined” than the parties in Pacor. Id. at 635.

This Court’s decision in Jn re Salem has been cited for the

proposition that “when [a] plaintiff alleges liability resulting

from the joint conduct of the debtor and non-debtor defen-—

dants, bankruptcy jurisdiction exists over all claims under

section 1334.” In re Wood, 825 F.2d at 94 (citing In re Salem,

783 F.2d at 634). In re Wood involved a dispute among

the directors/stockholders of a medical clinic. Dr. Arthur

Wood, III sued Dr. and Mrs. James Wood and Woodrow

Barham for the wrongful appropriation of corporate assets.

Before the filing of Dr. Arthur Wood’s single complaint

a

SR TRY STRESS Oy ees cupre apa SEMEL ELE HELLO OR I RIE Pe La gs

37a

against all three defendants, Dr. and Mrs. James Wood had

filed a Chapter 11 petition. A dispute subsequently ensued as

to whether the entire matter fell within bankruptcy jurisdic-

tion. The Fifth Circuit held that the “complaint [was] suffi-

ciently related to the pending bankruptcy to allow the district

court to exercise jurisdiction under section 1334.” Jn re Wood,

825 F.2d at 93. The Court further stated:

The complaint against the bankruptcy debtors could have

a conceivable effect on their bankruptcy. The plaintiff

seeks to recover stock and monies that the debtors

allegedly appropriated from the clinic. They seek to

resolve the disputed allocation of interest in the clinic.

To the extent that the debtors’ interest in the Clinic, their

stock holdings, or their withdrawals are now property of

the estate, the complaint against them has a potential

effect on their estate.

Id. at 93-94. The Court acknowledged the possibility that the

complaint, which raised a post-petition claim, could ulti-

mately have no effect on the bankruptcy proceeding. Unable,

however, to conclude that the suit would have no conceivable

effect on that proceeding, the court found “related to” juris-

diction as to both the debtor and nondebtor defendants. stat-

ing:

The plaintiff has filed one complaint against the defen-

dants seeking liability for their joint conduct. Success

against any of the defendants will have a potential effect

on the estate. For example, if Dr. Wood and his wife are

held liable but Barham is not, the bankrupt estate may

bear the entire burden of the judgment. If, on the other

hand, Barham is found jointly liable, the estate may bear

only a portion of the judgment. Moreover, in filing the

complaint, the plaintiff challenged the combined actions

of both the debtors and Barham, a non-debtor. Res-

olution of the dispute will necessarily involve, there-

fore, consideration of Barham’s involvement in those

actions. We find support in the Court of Appeals for the

Sixth Circuit and lower courts, which have held that

38a

when the plaintiff alleges liability resulting from the

joint conduct of the debtor and non-debtor defendants,

bankruptcy jurisdiction exists over all claims under sec-

tion 1334.

Id. at 94.

The degree of identity between a debtor and nondebtor

codefendants was an important factor in A.H. Robins Co. I, a

mass tort case involving the Dalkon Shield, an intrauterine

contraceptive device. In that case, A.H. Robins was faced

with an overwhelming number of federal and state actions

seeking damages for injuries allegedly sustained by the use of

the Dalkon Shield. The pending litigation caused A.H.

Robins, the manufacturer of the device, to file a petition

under Chapter 11 of the Bankruptcy Code. By the time A.H.

Robins filed its petition, over 5,000 suits had been filed. More

than half named A.H. Robins as the sole defendant, while a

codefendant or codefendants were named in the others. When

the filing of the petition automatically stayed all suits against

AH. Robins under Section 362(a), a number of plaintiffs in

suits in which A.H. Robins was named along with at least one

codefendant sought to sever their actions against A.H. Robins

and proceed against the codefendant or codefendants. A.H.

Robins then sought injunctive relief restraining the prosecu-

tion of the actions against its codefendants. The district court

granted a preliminary injunction, holding that all actions that

might be satisfied from proceeds of the debtor’s products lia-

bility policy with Aetna Casualty and Insurance Company

were stayed, and enjoined further litigation in eight civil

actions.

Shortly after entry of the preliminary injunction, A.H.

Robins moved for: a determination of trial venue of all

Dalkon Shield suits; identification of such cases as were

“related to” the Chapter 11 case; and transfer of such cases to

the Eastern District of Virginia for trial. The district court

held that: (1) pursuant to Section 1334(b), all actions based

upon personal injury tort or wrongful death claims arising

from the use of the Dalkon Shield were proceedings related to

the Chapter 11 case; (2) pursuant to Sections 157(b)(5) and

a as el a

a ee ts ee el

39a

1334(b), all such actions, wherever pending, were to be tried

in the Eastern District of Virginia; (3) all actions related to

the Chapter 11 case then pending in or subsequently removed

to any federal district court during the pendency of the Chap

ter 11 case were to be transferred to the Eastern District of

Virginia; and (4) the court was not prevented from later

abstaining under Section 1334(c)(1) or remanding under Sec-

tion 1452(b). This order and the preliminary injunction were

both appealed to the Fourth Circuit.

In discussing the propriety of the stay issued against A.H.

Robins’ nondebtor codefendants, the Fourth Circuit stated

that, although Section 362(a)(1) is generally available only to

a debtor, proceedings against nonbankrupt codefendants may

be stayed by a bankruptcy court where there are “unusual

circumstances.” A.H. Robins Co. I, 788 F.2d at 999. Such a

Situation arises when “there is such identity between the

debtor and the third-party defendant that the debtor may be

said to be the real party defendant and that a judgment against

the third-party defendant will in effect be a judgment or find-

ing against the debtor.” Jd. The court stated that “an illus-

tration of such a situation would be a suit against a third-party

who is entitled to absolute indemnity by the debtor on account

of any judgment that might result against them in the case.”

Id. In addition, such a relationship may exist where code-

fendant liability is “directly attributable to the debtor.” /d. at

1004.

Based on the principles outlined above, we believe the dis-

trict court has “related to” subject matter jurisdiction over the

breast implant claims pending against the nondebtor defen-

dants in this case. Thousands of suits asserted against Dow

Corning include claims against the nondebtors, and the nature

of the claims asserted establishes that Dow Corning and the

various nondebtor defendants are closely related with regard

to the pending breast implant litigation.'' Dow Chemical and

'| The opt-out claims asserted against Dow Corning and the var-

ious nondebtor defendants generally can be divided into four cate-

gories: (i) “Multiple Implant Actions,” which are actions where

plaintiffs received implants manufactured by both Dow Corning and

one or more of the nondebtors; (ii) “Supplier Actions,” which involve

40a

Corning Incorporated have already asserted cross-claims

against each other and Dow Corning in the underlying liti-

gation, and the other nondebtor defendants have asserted

repeatedly throughout their briefs, motions, and oral argu-

ments that they intend to file claims for contribution and

indemnification against Dow Corning, and we have no reason

to doubt the veracity of those assertions at this time.

We find that it is not necessary for the appellees first to

prevail on their claims against the nondebtor defendants, and

for those companies to establish joint and several liability on

Dow Corning’s part, before the civil actions pending against

the nondebtors may be viewed as conceivably impacting Dow

Corning’s bankruptcy proceedings. The claims currently

pending against the nondebtors give rise to contingent claims

against Dow Corning whieh unquestionably could ripen into

fixed claims. The potential for Dow Corning’s being held

liable to the nondebtors in claims for contribution and indem-

nification, or vice versa, suffices to establish a conceivable

impact on the estate in bankruptcy. Claims for indemnifica-

tion and contribution, whether asserted against or by Dow

Corning, obviously would affect the size of the estate and the

length of time the bankruptcy proceedings will be pending, as

well as Dow Corning’s ability to resolve its liabilities and

proceed with reorganization. In addition, we believe there is

a qualitative difference between the single suit involved 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 contribution sim-

ply does not represent the same kind of threat to a debtor’s

claims against the nondebtors as manufacturers and claims against Dow

Corning as the supplier of silicone materials to the nondebtors; (iii)

“Conspiracy Actions,” which allege that Dow Corning and the non-

debtors conspired to defraud the plaintiffs by fraudulently withholding

material information regarding the hazards of breast implants: and (iv)

“Form Complaint Actions,” which simply name Dow Corning and the

nondebtors as defendants without making any specific allegations of

individual wrongdoing. (See Motion of Minnesota Mining and Manu-

facturing Company for an Order Pursuant to 28 U.S.C. § 157(b)(5)

at 7).

4la

reorganization plan as that posed by the thousands of poten-

tial indemnification claims at issue here.

Cognizant of the fact that “related to” jurisdiction cannot

be limitless and concerned about granting benefits of the

automatic stay in bankruptcy to solvent codefendants, we nev-

ertheless believe the possibility of contribution or indemni-

fication liability in this case is far from attenuated. We

conclude that Section 1334(b) juri_ci cion exists over the

actions pending against Dow Chemical, Corning Incorporated,

Minnesota Mining, Baxter, and Bristol-Myers Squibb that are

the subject of the companies’ Section 157(b)(5) motions.

2. Joint Insurance

Dow Corning, Dow Chemical and Corning Incorporated

also argue that “related to” jurisdiction exists as to claims

pending against the shareholders because the three companies

share joint insurance. We believe this argument provides addi-

tional support for the existence of “related to” jurisdiction

under the unique facts of this case, but address it only briefly

because we have already concluded that Section 1334(b)

jurisdiction exists over breast implant claims pending against

Dow Corning and one or both of its parents.

Dow Corning, Dow Chemical and Corning Incorporated are

co-insured under various insurance policies, which together

provide over $1 billion in coverage. Dow Corning’s interest

in the policies is one of the largest assets of its bankruptcy

estate. In addition, Dow Corning recently entered into ten

new insurance settlements under which the estate will receive,

if approved by the bankruptcy court, approximately $350 to

$450 million in cash. Most of these settlements involve poli-

cies under which Dow Chemical or Corning Incorporated is a

co-insured.

Dow Corning, Dow Chemical, and Corning Incorporated

claim that the district court’s order, by allowing thousands of

claims to proceed separately against Dow Chemical and Corn-

ing Incorporated, will diminish the value of this major

bankruptcy asset to the extent that settlements, judgments and

defense costs incurred by the shareholders will exhaust pol-

42a

icy limits otherwise available to Dow Corning, its creditors,

and individuals asserting claims in the bankruptcy proceed-

ings. In addition, all three co-insureds argue that the policies

will be further diminished if and when payments must be

made to Minnesota Mining, Baxter, or Bristol-Myers Squibb.

Dow Chemical has already notified insurers that it is assert-

ing claims against the jointly-held policies on the ground that,

as a co-insured, it is entitled to recover from the insurers all

of its defense costs, as well as any settlements or judgments

paid by it in litigating breast implant claims. The concern,

then, is that permitting scores of trials against the share-

holders to go forward while litigation against the debtor is

stayed may result in the shareholders making claims for insur-

ance and seeking and obtaining payment from the insurers

before Dow Corning is able to make any claims of its own.

The district court rejected this argument for the existence

of “related to” jurisdiction, holding that, while a bankruptcy

court has broad discretion over a debtor’s interest in a lia-

bility insurance policy shared with a nondebtor, no judgment

has been entered yet against Dow Chemical or Corning Incor-

porated and neither company has a claim pending against the

insurance policies at this time. We believe the district court is

in error because, as we stated earlier, an immediate impact on

a debtor’s estate is not a prerequisite for Section 1334(b)

jurisdiction. Under the facts of this case, we believe the pos-

sible depletion of insurance policies depends on contingencies

sufficiently immediate to support a finding of “related to”

jurisdiction. See, e.g., A.H. Robins Co. I, 788 F.2d at 1008

(stating that “irreparable harm would be suffered by the

debtor and by the defendants since any of [the] suits against

[the] co-defendants, if successful, would reduce and diminish

the [debtor’s] insurance fund”); In re Zale Corp., 62 F.3d 746,

758-59 (5th Cir.1995) (concluding that, where disputes

regarding an insurance policy can have an effect on a debtor’s

estate, the bankruptcy court has “related to” jurisdiction over

nondebtors’ claims against the insurer); Coar v. National

Union Fire Ins. Co., 19 F.3d 247, 249 (Sth Cir.1994) (stating

that, where there is a “cognizable threat” that insurance pol-

icy proceeds would not cover plaintiffs’ claims and could

pene apitaite ee i ‘i

te Me Hiden ROI So a

43a

expose the debtor’s estate to liability, a suit against a debtor’s

insurer is “related to” the debtor’s bankruptcy case): Jn re

Titan Energy, Inc., 837 F.2d 325, 329 (8th Cir.1988) (noting

that the scope of a products liability insurance policy affects

the size of a debtor’s estate for distribution).

Dow Corning’s interest in the insurance policies at issue is

property of its estate under the expansive definition set forth

in 11 U.S.C. § 541(a)(1). The threat posed to those insurance

policies if claims pending against Dow Chemical and Corning

Incorporated are permitted to go forward in a separate man-

ner supports a finding of “related to” jurisdiction under Sec-

tion 1334(b). The prospect of Dow Chemical and Corning

Incorporated being able to assert mature, liquidated claims

against the insurance proceeds if litigation pending against

them is permitted to go forward demonstrates a conceivable

impact on the bankruptcy proceedings. If it is determined that

Dow.Chemical or Corning Incorporated has a priority to the

insurance proceeds, even if the bankruptcy court has the

Power to prevent payments of the proceeds while Dow Corn-

ing is in bankruptcy, the risk remains that the insurance cov-

erage may be eviscerated when the proceeds are eventually

distributed. In addition, certain of the policies cover defense

expenses, and those costs alone may Significantly reduce the

pool of coverage available to Dow Corning if the claims

pending against Dow Chemical and Corning Incorporated are

allowed to proceed separately. In addition, the bankruptcy

court has yet to determine whether it has the power to prevent

Dow Corning’s co-insureds from receiving proceeds of the

jointly-held policies while Dow Corning is in bankruptcy.

Resolution of the dispute over the right to proceeds alone will

have a conceivable effect on Dow Corning’s bankruptcy

proceedings.

IV.

We next address the power of the district court, sitting in

bankruptcy, to fix the venue for the trial of personal injury

tort and wrongful death claims asserted in non-bankruptcy

44a

forums pursuant to 28 U.S.C. § 157(b)(5). Section 157(b)(5)

provides:

The district court shall order that personal injury tort and

wrongful death claims shall be tried in the district court

in which the bankruptcy case is pending, or in the dis-

trict court in the district in which the claim arose, as

determined by the district court in which the bankruptcy

case is pending.

The purpose of Section 157(b)(5) is “to centralize the admin-

istration of the estate and to eliminate the ‘multiplicity of

forums for the adjudication of parts of a bankruptcy case.’ ”

A.H. Robins Co. I, 788 F.2d at 1011 (citation omitted). Cen-

tralization of claims increases the debtor’s odds of develop-

ing 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.” /d.

It has been established that a “bankrupt debtor who is a

defendant in a personal injury action may move under section

157(b)(5) to transfer the case to one of two venues: (1) the

district where the bankruptcy is proceeding; or (2) the district

where the claim arose.” Jn re Pan Am Corp. I, 16 F.3d at 516.

The question for our consideration is whether Section

157(b)(5) allows for the transfer of personal injury and

wrongful death claims pending against nondebtor defendants

who have been sued with a debtor under claims of joint and

several liability.

The Fourth Circuit has construed Section 157(b)(5) as per-

mitting the transfer of such cases, and we follow that Circuit’s

approach. In A.H. Robins Co. I, by the time A.H. Robins filed

its Chapter 11 petition, 5,000 suits were pending against the

company. More than half of those cases named A.H. Robins

as the sole defendant, while a codefendant or codefendants

were named in the others. After the district court issued a pre-

liminary injunction against suits by A.H. Robins’ codefen-

dants, A.H. Robins moved for a determination of trial venue

of all Dalkon Shield suits, an identification of cases “related

to” the bankruptcy case, and the transfer of those cases to the

45a

district court where the bankruptcy proceedings were being

held for trial. The district judge held that, pursuant to Section

1334(b), all actions based upon personal injury tort or wrong-

ful death claims arising from the use of the Dalkon Shield

were proceedings “related to” A.H. Robins’ Chapter 11 case

and that, pursuant to Sections 1334(b) and 157(b)(5), all such

actions, wherever pending, were to be tried in the Eastern

District of Virginia. In addition, the district court held that

all actions “related to” the Chapter 11 case then pending in

any federal district court or subsequently removed to any fed-

eral district court during the pendency of A.H. Robins’

bankruptcy case were to be transferred to the Eastern District

of Virginia.

In reviewing the validity of the district court’s order fixing

the venue for the trial of all Dalkon Shield cases and trans-

ferring such cases to the Eastern District of Virginia, the

Fourth Circuit stated: “Unquestionably the district court in

this case had the power under the statute to fix the trial venue

in its district for all the Dalkon Shield cases.” Id. at 1010

(stating also that the power of the district court to fix venue

for all the pending Dalkon Shield tort cases is “stated in

unmistakable terms in section 157(b)(5)”). The Fourth Circuit

Stated its intent in consolidating the Dalkon Shield litigation

as follows:

Since the Dalkon Shield litigation began, forty claims

have actually been tried but over $517,000,000 have

been expended in defending or settling Dalkon Shield

suits or claims. It is impossible to anticipate the stu-

pendous costs that would be involved if all the claims

here had to be tried. If the claimants as a whole are to

realize reasonable compensation for their Claims, it is

obviously in the interest of the class of claimants as a

whole to obviate the tremendous expense of trying these

cases separately. If the bankruptcy court could arrive at

a fair estimation of the value of all the claims and submit

a fair plan of reorganization based on such estimation,

with some mechanism for dispute resolution and accept-

able to all interested parties, great benefit to all the

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claimants could be achieved and the excessive expense

of innumerable trials, stretching over an interminable

time, could be avoided. In addition, the real purpose of

the proceedings (i.e., a reorganization of the debtor and

its continuance as a going business) could be attained.

Id. at 1013 (footnote omitted). The court stated that these

objectives could not be achieved until “all Dalkon Shield

claims and suits [were] centralized before a single forum

where all interests [could] be heard and in which the interests

of all claimants with one another [could] be harmonized.” /d.

at 1014. The court concluded by stating:

That undoubtedly was the purpose of the motion to fix

venue and to transfer the pending suits to the district

court sitting in bankruptcy before which the proceedings

were pending. This unquestionably was the idea which

prompted the district court to opt tentatively in his order

fixing venue in the district court sitting in bankruptcy for

all these claims. We approve of the idea and find it con-

ducive of the interests of all concerned.

Id. at 1014.

We agree with the Fourth Circuit that Section 157(b)(5)

should be read to allow a district court to fix venue for cases

pending against nondebtor defendants which are “related to”

a debtor’s bankruptcy proceedings pursuant to Section

1334(b).'* This approach will further the prompt fair, and

complete resolution of all claims “related to” bankruptcy pro-

ceedings, and harmonize Section 1334(b)’s broad jurisdic-

tional grant with the oft-stated goal of centralizing the

administration of a bankruptcy estate.

As We note that our holding here is limited to the district court’s

ability to consider motions under 28 U.S.C. § 157(b)(5) with respect to

the trial venue of the breast implant claims at issue.

47a

V.

Finally, a Section 157(b)(5) motion “requires an abstention

analysis.” In re Pan Am Corp., 950 F.2d 839, 844 (2d

Cir.1991) (“Jn re Pan Am Corp. IT”). The abstention provi-

sions of 28 U.S.C. § 1334(c) qualify Section 1334(b)’s broad

grant of jurisdiction. Jn re Salem, 783 F.2d at 635. It is for the

district court to “determine in each individual case whether

hearing it would promote or impair efficient and fair adjudi-

cation of bankruptcy cases.” Jd.

Section 1334 provides for two types of abstention: dis-

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

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

Section 1334(c)(2) states in relevant part:

Upon timely motion of a party in a proceeding based

upon a State law claim or State law cause of action,

related to a case under title 1] but not arising under

title 11 or arising in a case under title 11, with respect

to which an action could not have been commenced in

a court of the United States absent jurisdiction under

this section, the district court shall abstain from hearing

such proceeding if an action is commenced, and can be

timely adjudicated, in a State forum of appropriate juris-

diction.

For mandatory abstention to apply, a proceeding must: (1) be

based on a state law claim or cause of action; (2) lack a fed-

eral jurisdictional basis absent the bankruptcy; (3) e com-

menced in a state forum of appropriate jurisdiction; (4) be

capable of timely adjudication: and (5) be a non-core pro-

ceeding. Non-core proceedings under Section 157(b)(2)(B)

(i.e. liquidation of personal injury tort or wrongful death case)

48a

are not subject to Section 1334(c)(2)’s mandatory abstention

provisions pursuant to 28 U.S.C. § 157(b)(4)."°

The district court in this case determined that Section

157(b)(4) rendered exempt from the mandatory abstention

requirement all personal injury tort claims pending solely

against Dow Corning, and decided not to abstain discre-

tionarily with regard to those claims at this time. Because the

district court found that it did not have subject matter juris-

diction over the claims pending against the nondebtor defen-

dants, it did not address the abstention issue in detail and

merely incorporated by reference its analysis of the abstention

issue pertaining to claims pending solely against Dow Corn-

ing. It also remains to be fully determined whether the absten-

tion exception in Section 157(b)(4) applies to claims pending

against nondebtor defendants and, if not, whether the factors

calling for mandatory exemption under Section 1334(c)(2)

have been met. The district court did not directly address

these matters, and we refrain from addressing them in the first

instance. Because we believe the district court is in a better

position to make the necessary abstention determinations, as

to both mandatory and discretionary abstention, we remand

the case to the district court for further proceedings on this

issue.

VI.

We REVERSE the district court’s determination that it

lacked subject matter jurisdiction over the tort claims pend-

ing against the nondebtor defendants and that it did not have

the power to transfer those claims pursuant to Section

157(b)(5). In addition, we REMAND this case to the district

court for further proceedings on the issue of Section 1334(c)

abstention.

3 Section 157(b)(4) provides that “[nJon-core proceedings under

section 157(b)(2)(B) of title 28, United States Code, shall not be sub-

ject to the mandatory abstention provisions of section 1334(c)(2).”

49a

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF MICHIGAN

SOUTHERN DIVISION

Case No. 95-CV-72397-DT

Dated: Sept. 12, 1995.

In Re: Dow CorNING CORPORATION,

Debtor.

MEMORANDUM OPINION AND ORDER

ON THE DEBTOR DOW CORNING’S

MOTION TO TRANSFER

HON. DENISE PAGE Hoop

I. INTRODUCTION/FACTS:

This matter is before the court on the Debtor Dow Corning

Corporation’s motion to transfer certain breast implant cases

to the United States District Court, Eastern District of Michi-

gan pursuant to 28 U.S.C. § 157(b)(5). Responses were filed

and a hearing was held on the matter.

At the onset, the Court is very cognizant of the rights of the

claimants involved in this matter under our judicial system as

well as the protections afforded to the Debtor Dow Corning

under our bankruptcy laws. With these sometime competing

interests in mind, the Court has attempted to balance the

rights of both the Debtor and the claimants in its-decision.

On May 15, 1995, the Debtor, Dow Corning Corporation,

sought a voluntary petition for reorganization under Chapter

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50a

11 of the Bankruptcy Code with the Bankruptcy Court of the

United States District Court, Eastern District of Michigan,

Northern Division in Bay City, before the Honorable Arthur

J. Spector. On June 12, 1995, the Debtor filed a motion to

transfer certain breast implant cases before the Bankruptcy

Court. Judge Spector entered a Determination and Report and

Recommendation Regarding the Debtor’s Motion to Transfer

on June 13, 1995 indicating that the District Court had juris-

diction over this motion. On July 5, 1995, this Court entered

an order provisionally transferring the opt-out breast implant

cases involving the Debtor only to the Eastern District of

Michigan pending a hearing scheduled for the motion on July

31, 1995.

Debtor is a leading producer of silicone products. Dow

Corning was formed in 1943 as a corporation owned by Corn-

ing Incorporated and Dow Chemical Company (each has a

50% ownership interest) to develop and produce silicones and

silicone products during World War II. In 1994, the Debtor

Dow Corning’s total sales were nearly $2 billion. The Debtor

manufactured breast implants for commercial use from

approximately 1964 until 1992. During a part of this time, the

Debtor also supplied certain raw materials to other breast

implant manufacturers. According to the Debtor, in the year

of its highest sales in 1991, breast implants only accounted

for less than 1% of the Debtor’s sales.

Silicone gel breast implants consist of a silicone elastomer

“envelope” filled with silicone gel. The implants are surgi-

cally implanted for purposes of breast reconstruction in breast

cancer patients and for cosmetic reasons. These implants have

the same chemical make up as silicone materials used to make

catheters, shunts, pacemaker leads and other medical devices.

In the early 1980s, silicone breast implants were subject to

occasional product liability lawsuits. By 1987, 50 such law-

suits had been filed. In 1990 and 1992, over 100 lawsuits

were filed against the Debtor. However, beginning in 1992,

the implant litigation drastically increased. Over 3,000 suits

were filed against the Debtor in 1992, over 8,000 in 1993 and

Sla

over 7,000 in 1994. The litigation included both individual

claims and actions on behalf of putative classes. By early

1995, the Debtor was a Defendant in 45 putative class action

lawsuits (31 in various federal district courts, 12 in state

courts and 2 in Canada) and over 19,000 individual lawsuits.

All the suits combined involved more than 36,000 claimants.

The Debtor was sued both as the manufacturer of breast

implants and supplier of silicone raw materials to other breast

implant manufacturers.

According to the Debtor, these claims uniformally allege

that breast implants cause diseases, including autoimmune

disease, scleroderma, systemic disorders, joint swelling and

chronic fatigue. The damages sought in these cases are sub-

stantial, ranging from hundreds of thousands to tens of mil-

lions of dollars in compensatory and punitive damages.

Claims involving mechanical defects, including rupture of the

implants, are also alleged by the claimants.

In June 1992, pursuant to 28 U.S.C. § 1407, the Judicial

Panel on Multi District Litigation (“MDL”) ordered that fed-

eral actions involving breast implants be transferred to the

Honorable Sam C. Pointer in the Northern District of

Alabama for coordinated or consolidated pretrial proceedings

(“MDL No. 926”). In re Silicone Gel Breast Implants Prod-

ucts Liability Litigation, MDL No. 926, 793 F.Supp. 1098

(J.P.M.L. 1992).

The Debtor asserts that as that litigation progressed, so did

efforts to achieve a global resolution of this controversy.

Although the Debtor contends that its products were safe and

did not cause the diseases being claimed, it was compelled to

recognize that its resources were not unlimited and that the

litigation was diverting management’s attention from the

company’s core businesses and that the costs of continued

litigation would be substantial. According to the Debtor, in

1994, its litigation costs exceeded $200 million.

After months of negotiations with codefendants and

claimants, a court-approved “Steering Committee” repre-

senting breast implant claimants, the Debtor and other

52a

implant manufacturers entered into a “global settlement” of

breast implant claims on March 23, 1994. The Debtor agreed

to contribute up to $2.02 billion (out of a total settlement of

$4.25 billion) of the funding required by the settlement. Judge

Pointer approved the settlement as fair and reasonable in a

September 9, 1994 Order after certifying one of the consoli-

dated federal actions as a class action for purposes of settle-

ment under Fed.R.Civ.P. 23(b)(3).

It appears that the global settlement did not resolve the

controversy and the future of that agreement, at this time, is

in question. First, the Agreement is oversubscribed in that

the claims being made against the established funds exceed

the Defendants’ funding commitments. Second, numerous

claimants have opted not to participate in the settlement,

electing instead to pursue individual suits. As of May 1995,

over 6,000 claimants had opted out of the global settlement

and are pursuing individual actions (“opt-out” claimants). The

Debtor asserts that it cannot both fund the settlement and con-

tinue to incur substantial litigation costs in connection with

the opt-out claimants. These opt-out claims which led to

costly proceedings in state courts, are a major reason for the

Debtor’s decision to seek bankruptcy protection, according to

the Debtor.

In early 1992, the Food and Drug Administration (“FDA”),

asked for a voluntary moratorium on the production of breast

implants. Since that time, the Debtor has tried to verdict six

. breast implant cases involving nine claimants. The jury

returned a verdict in favor of the Debtor in three of the cases,

in favor of the plaintiffs in two of the cases; and in the sixth

case, involving two plaintiffs, the jury found in favor of one

plaintiff and against the other. According to the Debtor, none

_ ___ of the juries have awarded punitive damages in the post-

moratorium trials. -

The Debtor asserts that breast implant trials are time-

consuming. Complex scientific evidence is involved in vari-

ous scientific fields. The above trials ranged in length from

two to eleven weeks, excluding months of preparation that

a

$3a

preceded each trial. According to the Debtor, the central issue

was the same: whether silicone gel breast implants cause dis-

ease. The Debtor asserts that the complexity of the cases

placed at a substantial disadvantage its efforts to deal with the

opt-out claims which were being pursued in state courts. The

State proceedings were uncoordinated and trial dates were

overlapping. When it filed for bankruptcy protection, the

Debtor faced approximately ninety trials over the next six

months, including seven trials with twenty-eight plaintiffs in

Texas during the month of June 1995. From the Debtor’s per-

spective, these conflicting trial settings created frantic con-

ditions that made it impossible to fairly, rationally, and

efficiently resolve the central scientific issue of whether

implants cause the diseases that are alleged. The Debtor states

that it could not succumb to exorbitant settlement demands

nor could it go to trial knowing that it could not muster

the resources necessary to mount an effective defense on so

many fronts simultaneously. The Debtor claims it was forced

to seek bankruptcy protection under Chapter 11 of the

Bankruptcy Code. However, despite the Chapter 11 pro-

ceedings and the automatic stay provisions of 11 U.S.C.

§ 362, the breast implant litigations are still ongoing. Plain-

tiffs throughout the United States have filed notices of non-

suit against, dismissals of and motions to sever the Debtor in

order to proceed to trial against Dow Chemical Co. and/or

Corning, Inc. In June and July 1995, suits against Dow Chem-

ical and/or Corning were set for trial in numerous counties

throughout Texas.

The Debtor has envisioned essentially a four-step process

in its reorganization proceedings. The Debtor’s proposal

claims to have taken into account the substantive and proce-

dural rights of the opt-out claimants and also ensures the

integrity of the bankruptcy proceeding. The first step is the

removal to local federal district courts of state opt-out claims

involving the Debtor’s implants pursuant to 28 U.S.C.

§ 1452(a). The second step is the instant motion to transfer,

which seeks to have all of the opt-out actions then transferred

54a

to the Eastern District of Michigan. Should the second step be

granted, the third step is a motion to consolidate the trans-

ferred claims and an early trial on the threshold issue of

whether implants cause the diseases being claimed pursuant

to Fed.R.Civ.P. 42. The Court would oversee a consolidated,

adversary trial that would focus on the scientific evidence as

it relates to the core issue of causation which would be bind-

ing on all opt-out claimants. The fourth step is for the

bankruptcy court to conduct an estimation or other valuation

proceeding, taking into account the results of the threshold

trial on causation, and to approve a plan of reorganization that

is consistent with that determination. Additional proceedings

may be thereafter determined by the Court at the conclusion

of the estimation or valuation proceedings, taking into

account the bankruptcy court’s plan of reorganization.

The Official Committee of Tort Claimants (“Tort Claimants”

or the “Committee”) asserts in its brief in opposition to the

Debtor’s Motion to Transfer that Dow Chemical and the

Debtor knew of and concealed from the public substantial

data suggesting that silicones were dangerous to the human

body. Notwithstanding the Debtor’s and its parents’ repeated

assurances to the public that its products were safe, jury

awards, settlements and a very large proposed class settlement

reflect that thousands of women have suffered injuries as a

result of receiving the implants. The Committee asserts that

apart from the issue of disease causation, many breast implant

recipients have been injured and often horribly scarred by the

rupturing or leaking of implants. Countless others fear that

their implants may rupture or leak in the future. These women

either have had or will need to have costly and painful “expla-

nation” surgery to remove their implants and are entitled to

substantial damages regardless of whether the leaking silicone

also caused a “disease.” The Committee further asserts that

the incidence of various conditions varies with each woman

depending on their particular medical history and biological

characteristics.

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5Sa

According to the Committee, several juries of the United

States have entered verdicts, ranging into the millions of dol-

lars, holding the Debtor liable for injuries caused by its breast

implants. The Committee asserts that the Debtor hopes to

wipe out these judgments and this history should it prevail in

one consolidated trial in this District and eliminate its liability

to tens or hundreds of thousands of injured women.

The Committee states that while the global settlement

approved by Judge Pointer of over $4 billion is sizable, it is

insufficient to compensate the plaintiffs for the injuries they

have suffered. In a report released on June 15, 1995 by the

claims administrator appointed by Judge Pointer to implement

the global settlement, Texas State Court Judge Ann Cochran,

440,000 women have registered under the settlement as poten-

tial claimants.

In its Motion to Transfer, the Committee asserts that the

Debtor has wreaked procedural havoc by removing numerous

pending state court cases to federal courts. Many of these

cases have subsequently been transferred to Judge Pointer as

“tag-along” cases by the MDL Panel. These cases join the

more than 10,000 actions earlier transferred to Judge Pointer

pursuant to the MDL Panel’s determination that joint pretrial

proceedings before a single court that could develop sub-

stantial expertise would conserve resources and best serve the

interests of all parties. According to the Committee, the

Debtor’s attempt to transfer all opt-out actions to this Court

would run roughshod over the considered judgments of the

MDL Panel and unnecessarily place this Court on a collision

course with Judge Pointer. The Committee asserts that Judge

Pointer has acquired an intimate and unrivaled familiarity

with the breast implant litigation since presiding over the con-

solidated pre-trial proceedings in the thousands of pending

federal breast implant suits in June 1992. Judge Pointer has

Supervised discovery that has included approximately 225

depositions and production of some 10 million pages of doc-

uments and has presided over complex and lengthy proceed-

56a

ings to approve and implement the global settlement since

spring 1994.

The Committee further asserts that the Debtor’s parent cor-

porations, Dow Chemical and Corning, Inc. are merely trying

to ride the coat tails of the Debtor’s bankruptcy proceedings

in order to benefit from the Debtor’s protection under the

bankruptcy laws.

The issues before the Court are: 1) whether it has juris-

diction to transfer the claims involving the Debtor; 2) if the

Court does have jurisdiction to transfer the claims, whether

the Court should abstain from exercising its authority; and 3)

whether it has jurisdiction over the claims against the Share-

holders.

II. ANALYSIS

A. Whether this Court has the jurisdiction and author-

ity to transfer the cases to the E.D. of Michigan

pursuant to 28 U.S.C. § 157(b)(5).

It is undisputed that the Debtor’s bankruptcy case is pend-

ing before the Bankruptcy Court, of the United States District

Court, Eastern District of Michigan. This Court has original

and exclusive jurisdiction of the Debtor’s title 11 action pur-

suant to 28 U.S.C. § 133(a). 28 U.S.C. § 157(b)(5) provides

that this District Court has the authority to determine the trial

venue of any personal injury tort claims involving the Debtor.

(5) The district court shall order that personal injury

tort and wrongful death claims shall be tried in the dis-

trict court in which the bankruptcy case is pending, or in

the district court in the district in which the claim arose,

as determined by the district court in which the

bankruptcy case is pending.

Personal injury and wrongful death claimants are specifically

subject to the overarching bankruptcy policy of centralizing

mass tort litigation so that the claimants” jury trial rights

are preserved. Langenkamp v. Culp, 498 U.S. 42 (1990). Sec-

tion 157(b)(5) treats personal injury claims as a special class

S7a

within the realm of bankruptcy law. Calumet Nat’! Bank V.

Levine, 179 B.R. 117, 120 (N.D. Ind. 1995). This section con-

fers enlarged powers upon the district court where the

bankruptcy actin was filed to fix venue of personal injury

claims Baumgart v. Fairchild Aircraft Corp., 981 F.2d 824,

832 (Sth Cir. 1993), cert. denied, 113 S.Ct. 2963 (1993). The

district court where the bankruptcy action was filed has the

sole authority for ultimately fixing the trial venue for personal

injury actions against the bankruptcy debtor. Calumet, 179

B.R. at 123.

B. If this Court does have jurisdiction, whether this

Court has the authority to transfer certain opt-

out claims from the MDL panel, Case No. 926 and

MDL Judge in the N.D. of Alabama to the E.D. of

Michigan.

The Tort Claimants argue that the MDL Panel’s previous

order preempts this Court’s authority to transfer certain opt-

out claims from the MDL Panel, Case No. 926 to this Court.

Other responses and objections filed with this Court have also

argued that this Court has no authority to transfer cases from

other districts and that only those district courts have the

authority to transfer cases. Generally, the district court where

the suit is pending has the sole authority to transfer a suit.

However, with regards to a bankruptcy action where personal

injury tort claims are involved, the Fourth Circuit in Jn re

A.H. Robins Co., Inc., 788 F.2d 994 (4th Cir. 1986), cert.

denied, 479 U.S. 876 (1986), stated:

. . As the appellants correctly construe [28 U.S.C.]

section 1412, the authority to transfer a suit under that

Statute rests solely with the court in which the suit is

pending and it provides no authority whatsoever to a dis-

trict court sitting in bankruptcy in one district and hav-

ing jurisdiction of the bankruptcy to transfer the venue

of a case against the bankrupt to another district. Section

157(b)(5), however, expressly confers on the district

58a

court sitting in bankruptcy and having jurisdiction of

the bankruptcy proceedings the power to fix the venue

of any tort case against the debtor pending in other

districts. The purpose of this latter statute, was, as Con-

gressman Kastenmeir declared, to centralize the admin-

istration of the estate and to eliminate the ‘multiplicity

of forums for the adjudication of parts of a bankruptcy

case.’ (cite omitted) That purpose would be thwaited and

the plain language of section 157(b)(5) nullified if the

power of the district court sitting in bankruptcy tc fix the

venue for tort claims against a debtor was to be pre-

empted by the provisions of section 1412. Wedo not

believe this to have been the intention of Congress

in enacting the two statutes. Section 157(b)S) was

drafted to cover the procedure in connection with a spe-

cial group of cases, to wit, personal injury tori claims

against a debtor in Chapter 1] proceedings wienever

pending and in that connection the section is sup:eme. In

all other cases related to the bankruptcy proceedings,

however, the general statute (i.e., section 1412) would

govern. This, we think, is the proper construction to be

given the two statutes. It is a construction whch har-

monizes the two sections. It conforms to that estblished

canon of statutory construction that ‘[w]e must ‘ead the

statutes [in those instances where there is any jossible

conflict] to give effect to each if we can do so wilile pre-

serving their sense and purpose.” (cites omited) To

accept the appellants’ interpretation and to nesate the

plain language of § 157(b)(S) ‘would violate tie basic

principle of construction that statutes should beread, if

possible, as harmonious texts.’ (cites omitted) W-, there-

fore, have no difficulty in finding that the distric judge’s

authority to fix venue of personal injury tortactions

against the debtor exists under § 157(b)(5), irrepective

of the district in which such controversy is jending.

(emphasis added).

59a

788 F.2d at 1011. In the A.H. Robins case, the Court went on

to state that the first and primary purpose of the proceedings

is to ascertain whether a fair reorganization of the debtor can

be achieved. Jd. at 1012. This purpose may well be com-

pletely thwarted if the energies of the debtor’s executives and

officers are initially diverted by, and the resources of the

debtor are dissipated in, the expenses of litigating the trial of

thousands of personal injury suits in courts throughout the

land spread over an interminable period of time. Jd. No

progress along estimating these contingent claims can be

made until all claims and suits are centralized before a single

forum where all interests can be heard and in which the inter-

ests of all claimants with one another may be harmonized. /d.

at 1014. However, it should be noted that A.H. Robins did not

address a situation involving a bankruptcy court, a district

court sitting in bankruptcy, and claims previously transferred

by the MDL to another district court.

The MDL has its authority to transfer “civil actions” for

pre-trial proceedings under 28 U.S.C. § 1407. The MDL has

recognized the bankruptcy stay against bankrupt defendants

before it and those claims that have been Stayed remain stayed

in the transferee court of the MDL. In re Asbestos Prod. Lia.

Lit., 771 F.Supp. 415, 421, note 6 (J.P.M.L. 1991). The MDL

Panel has noted that the transferee court should coordinate

with the concerned bankruptcy courts. 771 F.Supp. at 421,

n. 6. In re Apex Oil Co., 980 F.2d 1150 (8th Cir. 1992) also

recognized that the district court Sitting in bankruptcy has the

authority to fix the trial venue under Section 157(b)(5) or to

abstain from the suits pending before the MDL transferee

court. Based on these cases, this Court has authority over the

cases before the MDL that are the subject of the Debtor’s

motion.

60a

C. If this Court does have jurisdiction, whether

this Court must abstain or, alternatively, exercise

its discretion to abstain pursuant to 28 U.S.C.

§ 1334(c).

1. Mandatory Abstention.

A motion under section 157(b)(5), also requires an absten-

tion analysis. Jn re Pan American Corp., 950 F.2d 839,

844 (2nd Cir. 1991). The Tort Claimants’ brief and other

Claimants’ objections and responses have moved that this

Court abstain under 28 U.S.C. § 1334(c).

Section 157(b)(4) provides that “[n]on-core proceedings

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 Section 1334(c)(2).” Jn re

Pan Am, 950 F.2d at 845; 28 U.S.C. § 157(b)(4). This Court

is exempted from mandatory abstention under Section

1334(c)(2).

2. Discretionary Abstention.

In their responses and at oral argument, the Claimants’

attorneys urged that the Court abstain from transferring all of

the breast implant cases involving the Debtor to the Eastern

District of Michigan, specifically opposing the Debtor’s

proposition to hold one trial on the issue of causation for pur-

poses of estimation. For the reasons more fully set forth

below, the Court will not abstain its jurisdiction pursuant to

28 U.S.C. § 1334(c)(1) at this time. The Court will allow the

Bankruptcy Court to proceed with the estimation process

without holding the one causation trial requested by the

Debtor.

Congress has indicated that courts should not be too quick

to abstain from exercising their transfer powers under 28

U.S.C. § 157(b)(5). In re Pan Am, 950 F.2d at 845. Transfer

should be the rule, abstention the exception. Jd. The Court

should weigh the advantages and disadvantages advanced at

6la

the hearing. A.H. Robins, 788 F.2d at 1016. Factors enumer-

ated by the A.H. Robins case, include:

- Some cases may be fully prepared and ready for

State trial. Some cases may require substantial numbers

of local witnesses. Claimants may be receiving critical

medical, physical or psychological care in a local area

which would have to be halted or transferred to Rich-

mond. All of these factors are relevant.

Id. at 1016.

Issues of state law may also substantially affect the results

in individual cases and must be considered. Id. The abstention

doctrine manifests federal respect for State law and policy. Jn

re Pan Am, 950 F.2d at 846. Section 1334(c)(1) of Title 28 of

the United States Code provides for abstention by the district

court in such instances:

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 1].

28 U.S.C. § 1334(c)(1). In In re Pan Am, the Court addressed

two decisions by the district court involving its abstention

from certain cases. Jn re Pan Am involved the Lockerbie air

crash tragedy. The MDL panel had entered an order trans-

ferring all the federal cases to the Eastern District of

New York. The Pan Am defendants subsequently filed vol-

untary petitions for reorganization under Chapter 11 of the

Bankruptcy Code. All actions against the debtors were Stayed

by 11 U.S.C. § 362. Shortly thereafter, the Pan Am defendants

moved for an order pursuant to 28 U.S.C. § 157(b)(5) trans-

ferring the Florida state-court actions, known as the “Coker”

and the “Rosenkranz” actions to the Southern District Court

of New York, where the bankruptcy proceeding was filed. The

Pan Am debtors contemplated that the transfer to the South-

ern District of New York would be followed by another trans-

62a

fer to the Eastern District of New York where the MDL was

pending. The District Court in the Southern District of New

York decided to abstain from exercising the court’s transfer

powers in both cases. On appeal, the Second Circuit reversed

the district court’s decision as to the Coker decision because

the district court’s actions were based on improper consid-

erations. The Second Circuit held that the Coker action

involved federal law questions, which could not be a basis for

abstention. The Second Circuit, however, affirmed the district

court’s decision with regards to the Rosenkranz state court

action because the Court found that the two-step transfer plan

would engender further delay and expense. The debtors in the

In re Pan Am case did not seek transfer of the cases already

before the MDL to the district court where the bankruptcy

was pending.

The issue of abstention in relation to the MDL arose in Jn

re Apex Oil Co., supra. There, the Court affirmed the district

court’s decision to abstain while the claimants’ lawsuits pro-

ceeded in the multidistrict transferee court. The debtors in

Apex had filed Chapter 11 bankruptcy in the Eastern District

of Missouri. Acting under the authority of 28 U.S.C.

§ 1334(c)(1), the district court abstained from trying the

claims, reasoning that the MDL had transferred the claims to

the Eastern District of Pennsylvania. The bankruptcy stay was

lifted so that the claimants could pursue their claims in the

Eastern District of Pennsylvania. In Apex, the appellants

claimed that the MDL had authority to transfer “lawsvits”

only, but not bankruptcy claims, and that the district court’s

conclusion that their “claims” had been transferred was

flawed. Reviewing that decision, the Eighth Circuit found that

the distinction between lawsuits and claims does not negate

the fact that the district court had the statutory authority to

abstain while the claimants’ lawsuits proceeded in the mul-

tidistrict transferee court. The Court wrote: “[e]ven though

the ‘claims’ themselves may not have been transferred, we are

not convinced that the district court should therefore be

obliged to conduct duplicative proceedings in Missouri, thus

Pecnerememer meen

63a

Squandering the very economies which are the purpose of the

multidistrict transfer.” 980 F.2d at 1153. The District Court’s

order requiring all claimants to proceed against the debtors in

the MDL court in Pennsylvania was also affirmed, the Eighth

Circuit reasoning that it served the same purpose as the orig-

inal order requiring multidistrict coordination of the other

related cases.

The relationship between sections 157(b)(5) and 1334(c)(1),

the abstention statute, was addressed by the Sixth Circuit

in In re White Motor Credit, 761 F.2d 270 (6th Cir. 1985).

The Sixth Circuit stated that in liquidating tort cases in

bankruptcy, the district court should first decide whether to

leave the cases with claims in the bankruptcy court in the

courts where they are pending. If the Court decides against

this course

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