Reply Brief — Official Committee of Tort v. Dow Corning Corp.

No. 97-210

IN THE

Suprene Court of the United States

OCTOBER TERM, 1997

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OFFICIAL COMMITTEE OF TORT CLAIMANTS,

Petitioner,

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

PETITIONER’S REPLY BRIEF

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

TABLE OF CONTENTS

Page

Eeimnds GR AUTRE EE cw ee es ii

1. The Purported Violation of the Sixth Circuit’s

Mandate Is an Insubstantial Diversion From

the Central Question Regarding the Effect

OG Dr Pe, UD 6 oe ee sn 1

2. The Sixth Circuit’s Construction of 28 U.S.C.

§ 1334(d) Does Violence to the Clear

a 3

3. Section 157(b)(5) Was Not Intended to

Effect Mass Transfer of Nondebtor Litigation. ... 5

SOU, ose i es ey RT Se ee es 8

ii

TABLE OF AUTHORITIES

Cases: Page

A.H. Robins Co. v. Piccinin, 788 F.2d 994

(4th Cir.), cert. denied, 479 U.S. 876 (1986) ...... 6

In re Burns & Wilcox, Ltd. , 54 F.3d 475

Ce Sat. Se 6 sce Ce ne ee eee ee 4n.2

In re General Motors Corp., 3 F.3d 980

i Ce. Sbee «ks sk hee eee eee 5 n.2

Johnson v. United States, 163 F. 30 (1st Cir. 1908) .. 4

Lindsey v. O’Brien, Tanski, Tanzer & Young Health

Care Providers (In re Dow Corning Corp.),

86 F.3d 482 (6th Cir. 1996), cert. denied,

S57 DS. GR. FRG vs ae A ee eke eee 2

Murray v. Pan Am. World Airways, Inc. (In re

Pan Am. Corp.), 16 F.3d 513 (2d Cir. 1994) ...... 7

Thermtron Prods., Inc. v. Hermansdorfer,

S23 WS. SHO CISPR fw ws ec e uns 1 n.1, 4-5 n.2

Things Remembered, Inc. v. Petrarca, 116

o. Sh Ge ee ne ek Oe eee eee eee 2

United States v. District Court, 334 U.S.

yD eee hee a ee SO rs 2

Vendo Co. v. Lektro-Vend Corp., 434 U.S.

Nap TRPUe. 6n essa ee see eee eee 2

ili

Page

Statutes:

| ae 3

ao) a a 5

RS oe Br 4,5,7

a ae 3

UM, Tg ek et te ee ee 1

8 ee Be 1, 252

OM OO gk ee te eee ew en 4

Legislative Materials:

130 Cong. Rec. H7492 (daily ed. June 29, 1984),

reprinted in 4 Collier on Bankruptcy

(fpemeety (25m OG. 1996)... ww we 7-8

PETITIONER’S REPLY BRIEF

Petitioner undertakes herein only to meet arguments

advanced in respondents’ brief in opposition that were not

adequately anticipated in the petition.’

1. The Purported Violation of the Sixth Circuit’s

Mandate Is an Insubstantial Diversion From

the Central Question Regarding the Effect

of 28 U.S.C. § 1334(d)

The Court of Appeals stated two grounds -- enforcement

of its mandate and application of the expressio unius maxim

-- to find mandamus jurisdiction despite the clear proscription

in 28 U.S.C. § 1334(d) against appellate review of decisions

granting abstention under § 1334(c). See Pet. App. 6-7.

Respondents suggest that the important question about §

1334(d) posed by the petition may be avoided altogether on

the first ground, which they now elevate to the "principal

basis for mandamus jurisdiction" (Br. in Opp. 7). But that

argument devises a "mandate" from patently obiter dictum on

a subject that was in no way presented by the first appeal.

. The mandamus order of which review is sought runs neither for nor

against Minnesota Mining and Manufacturing Company ("3M"),

which, accordingly, is not named as a respondent to the petition for

a writ of certiorari. That company has nevertheless filed a 20-page

brief opposing certiorari. While petitioner believes 3M lacks

standing here, its brief is not in any event a substantial addition to

the papers already before the Court. It seems clear, for instance,

contrary to 3M’s view, that the central issue of the Circuit’s

appellate jurisdiction is not less ripe for review than was the similar

issue in Thermtron Prods., Inc. v. Hermansdorfer, 423 U.S. 336

(1976). Litigation against Dow Chemical in courts throughout the

country has been halted and transferred as a result of the decision

below, causing current injury to thousands of claimants

notwithstanding the District Court’s potential ability to entertain

individual abstention motions at a later procedural point.

2

It is no ground for avoiding review of the squarely presented

question respecting § 1334(d).

The only question on which the Sixth Circuit ruled in the

first appeal, there being no occasion to consider an abstention

decision that had not yet been made, concerned "the subject

matter jurisdiction 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."

Lindsey v. O’Brien, Tanski, Tanzer & Young Health Care

Providers (In re Dow Corning Corp.), 86 F.3d 482, 485 (6th

Cir. 1996), cert. denied, 117 S. Ct. 718 (1997) (Pet. App.

22a). Reversing the District Court on the "related to"

question, and finding there was power to transfer, the Circuit

remanded, leaving the still open question of abstention to the

District Court and making the observations on how to deal

with abstention that are now put forth by respondents as a

"mandate." But those expressions concerning what might or

should happen did not and could not create in advance

appellate jurisdiction over a subsequent abstention decision

rendered non-reviewable (as petitioner urges) by 28 U.S.C.

§ 1334(d).

The unquestioned authority of United States v. District

Court, 334 U.S. 258 (1948), affirming the appellate power to

enforce an actual mandate by mandamus (see Br. in Opp. 9),

has no bearing here. Jurisdiction of the type urged exists

only to enforce an appellate court’s decision of "whatever

was before [the] court, and disposed of by its decree."

Vendo Co. v. Lektro-Vend Corp., 434 U.S. 425, 427-28

(1978). Here, it is plain that abstention was not before the

Court of Appeals on the first apeal, and the dictum about

3

abstention could create no "mandate" because it dealt with no

issue presented for decision. Of course, this Court retains

clear authority to determine the scope of the lower court’s

mandate. See FTC v. Colgate-Palmolive Co. , 380 U.S. 374,

379 (1965).

The finding by the Circuit of mandamus power despite

§ 1334(d) is not insulated from review and not rendered

"purely academic" (Br. in Opp. 7) by the supposed

alternative or "principal" basis respondents invoke. If, as

petitioner urges, the Circuit’s treatment of § 1334(d) is

important and mistaken, the correction of the error will be a

definitive, final, and authoritative reversal, unaffected by the

purported mandate issue.

2. The Sixth Circuit’s Construction of

28 U.S.C. § 1334(d) Does Violence to

the Clear Intent of Congress

Without revisiting the misuse of expressio unius, the

substantial departure from this Court’s precedents, and the

neglect of legislative history argued in the petition (at 10-13),

petitioner notes some distortive devices to which respondents

are led in defending what the Court of Appeals wrote.

Urging a textual, "plain language" analysis, respondents

stress that § 1334(d) bars review by mentioning 28 U.S.C.

§§ 158(d), 1291, and 1292, but not mentioning § 1651

(mandamus). But the plain language leads them finally to the

point where § 1334(d) says an abstention decision "is not

reviewable by appeal or otherwise." The italicized words are

faced down in a footnote (p. 12 n.4), where we are told that

these words refer not to mandamus but to interlocutory

appeals under 28 U.S.C. § 1292(b). That surprise comes

from nowhere and rests on nothing; the filing of an

"application" rather than a "notice" of appeal does not render

4

the proceeding any less an appeal -- leaving respondents

without an explanation for the "or otherwise" language. The

argument from plain language collapses.

By a parity of flawed analysis, respondents announce that

the legislative history teaches nothing despite the unequivocal

statement, quoted in the petition (p. 11), showing that the

enumeration of specific courts and statutes was designed

precisely to mark district court appellate power over

bankruptcy court abstention decisions while barring any

further appeals to the circuits or to this Court. That in turn

is dismissed with the pronouncement (Br. in Op. 12) that

Congress could have expressed this purpose in another way.

The wisdom of Justice Holmes, on Circuit almost a century

ago, remains apt: "[I]t is not an adequate discharge of duty

for courts to say: We see what you are driving at, but you

have not said it, and therefore we shall go on as before."

Johnson v. United States, 163 F. 30, 32 (1st Cir. 1908).

Nor can respondents escape the controlling principles

announced in Things Remembered, Inc. v. Petrarca, 116 S.

Ct. 494 (1995), on the ground that no formal mandamus

petition was filed in that case. See Br. in Opp. 10 n.3. The

same is true here -- respondents filed only a notice of appeal,

which the Court of Appeals chose to treat as a mandamus

petition. This Court found no basis for reaching out in the

same manner to create jurisdiction in Things Remembered.”

3M misleadingly suggests (Br. 15) that courts have routinely granted

mandamus to review absiention decisions subject to the clear bar of

§ 1334(d). No such case exists. Those cited by 3M involved court-

made abstention doctrines, e.g., In re Burns & Wilcox, Lid., 54

F.3d 475, 476 (8th Cir. 1995) (recognizing availability of mandamus

"*faJbsent statutory prohibitions’") (citing Thermtron, 423 U.S. at

(continued...)

5

3. Section 157(b)(5) Was Not Intended to Effect

Mass Transfer of Nondebtor Litigation

The transfer power found by the Court of Appeals in 28

U.S.C. § 157(b)(5) over tort claims against nondebtors is

justified by respondents as a needed means to "centralize"

such claims in the bankruptcy court with claims against the

debtor. The undocumented assertion is belied by experience.

The transfer order has been nothing more or less than a

formula for paralysis, blocking thousands of suits against

nondebtors while not advancing the bankruptcy proceedings

in the slightest degree. The now insulated shareholder

corporations have never evinced a desire to have their

transferred cases do anything but rest immobile on the now

overloaded docket of the United States District Court for

Eastern Michigan. Now, in the bankruptcy, the Debtor is

seeking to give its shareholders a free release of all liability

through its plan of reorganization -- a ploy that does not

involve trying the claims against the shareholders and makes

clear that transfer was sought not to permit centralized

adjudication but to forestall litigation. The suggestion that

transfer was or is necessary to "facilitate reorganization" (id.

at 16) is a myth. The situation underscores the widely

destructive fallacy of the Sixth Circuit’s ruling that transfer

2(.. continued)

353) or cases remanded on grounds not authorized by 28 U.S.C. §

1447(c) and hence reversible on mandamus notwithstanding §

1447(d), e.g., In re General Motors Corp., 3 F.3d 980, 983 (6th

Cir. 1993).

Ce

6

of nondebtor litigation was contemplated by the drafters of §

ht Ig

Respondents suggest (Br. in Op. 16) that since §

157(b)(5) does not repeat the language in § 157(b)(2)

referring to personal injury claims "against the estate," it

must have been intended to empower the district court to

transfer all personal injury claims against any defendant. But

if Congress had meant to create such a sweeping and novel

power over nondebtor litigation, it would likely have done so

expressly and not by negative implication in a statute

otherwise devoted to dividing up business within the

bankruptcy between the district and bankruptcy courts.

Respondents’ central argument for their broad reading of

§ 157(b)(5) is the supposed Congressional policy mandating |

total centralization of all conceivably "related to" litigation in |

the bankruptcy forum. While the Sixth Circuit holds that it |

has located such a policy, Congress has never expressed it.

The Circuit relied for this point on two distinguishable cases

-- A. H. Robins Co. v. Piccinin, 788 F.2d 994 (4th Cir.), |

cert. denied, 479 U.S. 876 (1986), which as noted (Pet. 16-

17) focused its analysis almost entirely on claims against the |

debtor and in any event involved only a single product and |

. Respondents cannot seriously suggest that they act to prevent

“requiring plaintiffs seeking compensation for one injury to litigate

the same issues on two fronts." Br. in Opp. 16-17 n.8.

Respondents’ mission is to minimize, not maximize, convenience |

and recovery for tort plaintiffs. Moreover, the suggestion that the

claims against the shareholders are "merely duplicates" of those

against the Debtor (Br. in Opp. 16-17 n.8) is incorrect at best. Dow

Chemical has been held liable by at least two juries for its separate

and independent tortious conduct in connection with the testing and

development of silicone for implantation in the human body.

‘

7

manufacturer,* and Murray v. Pan Am. World Airways, Inc.

(In re Pan Am. Corp.), 16 F.3d 513 (2d Cir. 1994), which

concerned only claims against Pan Am and its affiliates.

The legislative history underlying Robins and Pan Am.

does not reflect that Congress gave any consideration to

nondebtor claims in expressing a policy to promote

centralization of bankruptcy proceedings. For example, Rep.

Robert Kastenmeier’s oft-quoted statement that the purpose

of § 157 was to avoid "creating a multiplicity of forums for

adjudication of parts of a bankruptcy case" actually had

nothing to do with transferring claims against nondebtors:

The House-passed bill contained a definition of what a

bankruptcy judge could properly do. The Senate bill

adopted a largely similar view with one exception.

Under the Senate-passed bill, bankruptcy judges could

not hear unliquidated claims. The Senate approach

would have repudiated decades of bankruptcy law and

practice. The change in the definition in the Senate-

passed bill would have contradicted the basic purposes of

the consolidated jurisdiction we adopted in 1978 in

response to the recommendations of the Commission on

Bankruptcy Laws. Finally, it would have dissipated the

assets of the estate by creating a multiplicity of forums

for the adjudication of parts of a bankruptcy case.

Petitioner did not, as Dow alleges (Br. in Opp. 15 n.7), claim that

no transfer was ever ordered in Robins. However, the transfer

initially ordered by the district judge was never effected because the

notice required by the Fourth Circuit was never given to individual

plaintiffs. Our sufficient point is that the absence of such transfer

did not impede resolution of the bankruptcy. See Pet. 21.

8

130 Cong. Rec. H7492 (daily ed. June 29, 1984) (citation

omitted), reprinted in 4 Collier on Bankruptcy (Appendix)

XX-18 through XX-19 (15th ed. 1996).

In context, it is clear that Rep. Kastenmeier was

concerned only about preserving centralized liquidation of

claims against the estate. His statement cannot be read to

show that this venue-setting provision was intended to create

broad new powers to transfer nondebtor cases. The Sixth

Circuit has read into § 157(b)(5) a power never intended by

Congress, a sound additional reason for review by this Court.

CONCLUSION

The 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

October 1997