Reply Brief — Daimlerchrysler Corp. v. Official Committee of Asbestos, 123 S. Ct. 884 (2003) (No. 02-661)

IN THE OFFICE OF THE CLERK

Supreme Court of the United States

OCTOBER TERM, 2002

IN RE FEDERAL-MOGUL GLOBAL, INC.

DAIMLERCHRYSLER CORPORATION,

FORD MOTOR COMPANY, AND

GENERAL MOTORS CORPORATION,

Petitioners,

Vv.

OFFICIAL COMMITTEE OF ASBESTOS CLAIMANTS OF

FEDERAL-MOGUL GLOBAL, INC., ET AL.

—

Respondents.

On Petition for Writ of Certiorari to the

United States Court of Appeals for the Third Circuit

REPLY TO BRIEF IN OPPOSITION

DAVID M. BERNICK CHRISTOPHER LANDAU

KIRKLAND & ELLIS Counsel of Record

200 E. Randolph Drive KIRKLAND & ELLIS

Chicago, IL 60601 655 Fifteenth Street, N.W.

(312) 861-2000 Suite 1200

Washington, DC 20005

(202) 879-5000

Counsel for Petitioners

December 17, 2002

ee

TABLE OF CONTENTS

Page

TABLE OF AUTHORITIES ......... ueeeneer oe iii

I. The Third Circuit Erred, And Created A Circuit

Conflict, By Holding That The Denial Of A Transfer

Motion Under 28 U.S.C. § 157(b)(5) Is Not

I oss So phe awe es rN eee ee ]

Il. The Third Circuit Erred, And Created A Circuit

Conflict, By Holding That A Cross-Jurisdictional

Remand Is Not Appealable ................... 4

III]. This Case Presents Issues of Signal Importance ... 8

8 re a ee rene er ere 10

il

ill

TABLE OF AUTHORITIES

Page(s)

CASES:

A.H. Robins Co. v. Piccinin,

FOO F.20 9P4 (4 Cir. 1986) . ww ccc cc ccvese i,2

Behrens v. Pelletier,

ee ere 6

Briscoe v. LaHue,

EE EE ci ow i che reccsvesneeseses 3

Celotex Corp. v. Edwards,

er er reer 7

Clark Cty. Sch. Dist. v. Breeden,

PEE AA A BOP EMMONS vce e ce eveccsscsucss 6

Connecticut Nat’l Bank v. Germain,

EE ko cb cesks cere ber dvasens 4,5

Cooper Indus., Inc. v. Leatherman Tool Group, Inc.,

ED as chad chee vesdeeveeneteas 6

Georgine v. Amchem Prods., Inc.,

83 F.3d 610 (3d Cir. 1996),

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Hudson-Ram L.P. v. Archer,

210 F.3d 387, 2000 WL 14398

re 5,6

In re Dow Corning Corp.,

86 F.3d 482 (6th Cir. 1996) ................ 1-3, 7,8

In re Saco Local Dev. Corp.,

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Lampf, Pleva, Lipkind, Prupis & Petigrow v. Gilbertson,

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Portland Golf Club v. CIR,

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Spectrum Sports, Inc. v. McQuillan,

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Thermtron Products, Inc. v. Hermansdorfer,

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_ Things Remembered, Inc. v. Petrarca,

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Torres v. Oakland Scavenger Co.,

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United States v. Verdugo-Urquidez,

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I. The Third Circuit Erred, And Created A Circuit

Conflict, By Holding That The Denial Of A Transfer

Motion Under 28 U.S.C. § 157(b)(5) Is Not Appealable.

The motions that were actually decided by the district

court below, in the decision over which the Third Circuit held

that it lacked appellate jurisdiction, were petitioners’

“motions to transfer the Friction Products Claims.” Pet. App.

56a (emphasis added). Under the Sixth Circuit’s decision in

In re Dow Corning Corp., 86 F.3d 482 (6th Cir. 1996), an

order denying such motions is appealable as both a “final”

and a “collateral” order. See id. at 487-88. The district court

below, however, attempted to insulate its decision from

review by also purporting (in the very same order denying the

motions to transfer) to “remand” these claims directly to the

state courts from which they had been removed, thereby

allowing respondents to argue that the order was

unreviewable as a remand order. And that is precisely what

respondents did argue in the Third Circuit, and argue again

here.

The Third Circuit, however, did not accept respondents’

characterization of the district court’s order as a remand

order. Rather, the Third Circuit held that the district court’s

order was unappealable when construed as the denial of a

transfer motion under 28 U.S.C. § 157(b)(5). See Pet. App.

19a-20a. That holding is not only manifestly incorrect, but

also flatly inconsistent with the Sixth Circuit’s holding in

Dow Corning. See 86 F.3d at 487-88.

Respondents do not even attempt to defend the Third

Circuit’s holding on the merits. That is not surprising,

because it is well-established (or was, until the ruling below)

that a relaxed standard of finality applies in bankruptcy cases,

where orders are “final” (and hence appealable) where “they

finally dispose of discrete disputes within the larger case.”

In re Saco Local Dev. Corp., 711 F.2d 441, 444 (ist Cir.

1983) (Breyer, J.) (emphasis in original). As the Sixth

Circuit recognized in Dow Corning, the denial of a transfer

motion under Section 157(b)(5) easily meets this standard:

whether claims against nondebtors are “related to” a

2

particular bankruptcy is a discrete question separate from the

claims at issue in the underlying bankruptcy, and would be

“effectively unreviewable” by appeal years later upon

confirmation of the debtor’s final plan of reorganization. 86

F.3d at 487-88. Indeed, for just this reason, the Dow Corning

court held that the denial of a transfer motion under Section

157(b)(5) is appealable as both a “final” judgment and a

“collateral” order. See id.; see also A.H. Robins Co. v.

Piccinin, 788 F.2d 994, 1009 (4th Cir. 1986) (holding that the

grant or denial of a Section 157(b)(5) transfer motion is

appealable as both a final and a collateral order).

While respondents conspicuously do mot defend the

decision below on the merits, they do deny the existence of

a circuit split on this issue. See Opp. 21-23 & n.6.

According to respondents, the Sixth Circuit’s decision in

Dow Corning (and the Fourth Circuit’s decision in A.H.

Robins on which it relied) are distinguishable from this case

because the district courts in those cases had not also entered

orders “remanding the claims at issue to the state courts.” Jd.

at 21; see also id. at 23 n.6. But here respondents are simply

quarreling with the Third Circuit’s decision that the district

court’s order was unappealable when construed as the denial

of a transfer motion. Pet. App. 19a-20a. Petitioners may

wish the Third Circuit had held that the denial of a transfer

motion is unappealable when coupled with a remand order,

but that is not what the Third Circuit did. See id. Under the

decision below, the law in the Third Circuit is that orders

denying transfer motions under Section 157(b)(5) are

unappealable, see id, while the law in the Sixth Circuit is

precisely the opposite, see 86 F.3d at 487-88. If that is not a

circuit split, it is hard to know what is.

Indeed, as respondents themselves implicitly acknowledge,

see Opp. 18-19, it is wholly illogical to couple the denial of

a transfer motion with a remand order, because those

dispositions are inherently inconsistent and mutually

exclusive. An order denying a transfer motion sends the

3

claims back to the federal courts to which they were removed

(and from which they were provisionally transferred),

whereas a remand order sends the claims back to the state

courts from which they were removed. A single order cannot

logically send the same claims back to both fora at once. For

the district court to deny the transfer motions after remanding

the claims, as respondents suggest, id. at 19, would have been

a meaningless act, because the court would have had before

it no claims to send back to the federal courts from which

they had been provisionally transferred.

It is not surprising, thus, that the Third Circuit took the

district court at its word and reviewed the challenged order

both as the denial of a transfer motion and as a remand order,

see Pet. App. 19a, and held that it was unappealable as either,

see id. at 19a-20a, 3la-36a. Those are not alternative

holdings: each one is logically necessary to the Third

Circuit’s judgment dismissing petitioners’ appeals for lack of

jurisdiction. Because the Court of Appeals declined to

characterize the challenged order, it could not have dismissed

petitioners’ appeals from that order without holding that it

lacked jurisdiction both over the denial of a Section 157(b)(5)

transfer motion and over a cross-jurisdictional remand order.

Accordingly, both of those holdings are squarely and

properly presently here, regardless of the validity of the Court

of Appeals’ alternative assumptions underlying those

holdings. See, e.g., United States v. Verdugo-Urquidez, 494

U.S. 259, 272 (1990) (“The Court often grants certiorari to

decide particular legal issues while assuming without

deciding the validity of antecedent propositions.”); Briscoe

v. LaHue, 460 U.S. 325, 328 n.3 (1983) (“Because we

granted certiorari to review the Court of Appeals’ holding,

we make the same assumptions for purposes of deciding this

case, without implying that they are valid.”). Respondents

cannot insulate the Third Circuit’s holding on the

appealability of Section 157(b)(5) transfer orders from this

Court’s review by simply challenging the validity of the

assumption underlying that holding.

4

Contrary to respondents’ assertion, thus, it is simply not

true that “[a]t the appellate level, the issue of ‘transfer’ was

completely irrelevant . . . [and] no longer presented a

justiciable case or controversy.” Opp. 18. Petitioners

challenged (and continue to challenge) the district court’s

denial of their transfer motions, and respondents defended

(and continue to defend) that denial. The Third Circuit

specifically and expressly held that the district court’s order,

when construed as the denial of a transfer motion under 28

U.S.C. § 157(b)(5), is not appealable, Pet. App. 19a-20a, and

that holding squarely conflicts with the Sixth Circuit’s

contrary holding in Dow Corning, 86 F.3d at 487-88. This

Court’s review is warranted to correct the Third Circuit’s

error, and resolve the resulting circuit conflict.

II. The Third Circuit Erred, And Created A Circuit

Conflict, By Holding That A Cross-Jurisdictional

Remand Is Not Appealable.

The Third Circuit also held that, when construed as a

remand order, the district court’s order was again

unappealable, notwithstanding the fact that the district court

purported to “remand” claims that had been removed to

other federal courts and then transferred. Pet. App. 31a-36a.

Because any such remand was unauthorized by the

bankruptcy remand statute—which specifically limits the

remand power to “[t]he court to which such claim or cause of

action is removed,” 28 U.S.C. § 1452(b)}—the Third Circuit

thereby erred. See, e.g. Thermtron Products, Inc. v.

Hermansdorfer, 423 U.S. 336, 351 (1976). And that error

created not one but two circuit splits: one on whether

remands based on an asserted lack of subject-matter

jurisdiction are unappealable even if otherwise beyond the

district court’s statutory authority, see Pet. 18-21, and the

other on whether a court other than “[t]he court to which [a

bankruptcy claim] is removed” has the statutory authority to

remand such a claim, see id. at 21-24.

5

Respondents contend in a footnote that the first of those

splits is not implicated here because “[n]Jothing in the court of

appeals’ discussion suggests” a holding that remands based

on lack of subject-matter jurisdiction are unappealable even

if otherwise beyond the district court’s statutory authority.

Opp. 17 n.4. That contention is mystifying, because the

Third Circuit could scarcely have been any more explicit on

this score. The Third Circuit expressly rejected petitioners’

argument that the district court’s order was appealable under

Thermtron dy holding that Thermtron (as _ allegedly

“clarified” by Things Remembered, Inc. v. Petrarca, 516 U.S.

124, 127-28 (1995)) simply did not apply to remand orders

based on lack of subject-matter jurisdiction. Pet. App. 34a.

According to the Third Circuit, “[a]s the basis for the District

Court’s remand in this case was lack of subject matter

jurisdiction (the absence of ‘related to’ jurisdiction), appeal

is... barred.” Id. (emphasis added). Respondents may be

unwilling to defend that holding, but they cannot simply deny

its existence. And it is telling that respondents do not deny

that at least four other circuits have held that Thermtron and

Things Remembered authorize appellate jurisdiction over

remand orders based on lack of subject-matter jurisdiction

where a district court otherwise exceeds its statutory

authority. See Pet. 19-21. Because those holdings conflict

with the decision below, see Pet. App. 34a, this Court’s

review is warranted.

Respondents also attempt to deny a circuit split on the

validity of direct cross-jurisdictional remands under the

bankruptcy remand statute, 28 U.S.C. § 1452(b), by asserting

that this statute “has no bearing here” at all. Opp. 15.

According to respondents, the remands in this case are

governed exclusively by the general remand statute, 28

U.S.C. § 1447(c), even though the claims in this case were

removed from state to federal court under the bankruptcy

removal statute, 28 U.S.C. § 1452(a), as “related to” the

Federal-Mogui bankruptcy within the meaning of the

bankruptcy jurisdictional statute, 28 U.S.C. § 1334(b).

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6

Needless to say, respondents turn the law upside down by

asserting that the bankruptcy remand statute is wholly

irrelevant to bankruptcy remands.

Respondents purport to base that extraordinary assertion

on this Court’s decision in Things Remembered, but that

reliance is misplaced. Things Remembered held only that

courts must apply both the general remand statute and the

bankruptcy remand statute where both provisions can

“comfortably coexist,” 516 U.S. at 129 (citing Connecticut

Nat'l Bank v. Germain, 503 U.S. 249, 253 (1992))—as in that

case, where both provisions precluded review of a remand

order, and there was no asserted inconsistency between them.

That holding is based on the venerable principle that courts

are required to reconcile the various provisions of the U.S.

Code whenever possible. See, e.g., Germain, 503 US. at

253. But respondents turn that principle on its head by

asking this Court to ignore the specific language of the

bankruptcy remand statute, 28 U.S.C. § 1452(b), in

evaluating the validity of a bankruptcy remand. Things

Remembered does not remotely authorize courts to use the

general remand provision to override the bankruptcy remand

provision where (as here) the provisions differ. The specific

may not always trump the general, but the general certainly

does not trump the specific.

Thus, respondents miss the point by focusing exclusively

on the general remand statute, and acting as if the bankruptcy

remand statute did not exist. Regardless of whether the

general remand statute authorizes a remand by a court other

than the court to which a claim was removed, the bankruptcy

remand statute plainly does not. The claims in this case were

removed from state courts across the Nation to the local

federal courts, and then provisionally transferred to the

federal court in Delaware. The latter court, therefore, was not

“(t]he court to which such claim or cause of action [was]

removed,” 28 U.S.C. § 1452(b), and therefore was not

authorized to remand the claims.

————— ee

i cl

7

That, in fact, is precisely the holding of the Ninth Circuit

in Hudson-Ram L.P. v. Archer, 210 F.3d 387, 2000 WL

14398 (9th Cir. Jan. 7, 2000) (unpublished). Respondents do

not contest this point, but instead deny the existence of a

conflict on the ground that “(t]he remand order in that case

was entered under § 1452(b),” rather than § 1447(c).

Opp. 16. That argument makes no sense. If, as defendants

| argue, Section 1447(c) trumps Section 1452(b) even with

| respect to claims removed under the bankruptcy removal

statute, then Hudson-Ram was incorrectly decided. Hudson-

| Ram is indistinguishable from this case: there, as here, claims

were removed from state to federal court under the

bankruptcy removal statute, and then transferred to another

federal court, which purported to remand them directly to the

| original state court. 2000 WL 14398, at *1. The Ninth

| Circuit held that it could review the case because “this was

not a proper ‘remand,’” id.; the Third Circuit held the

opposite, see Pet. App. 34a-36a. Again, if this is not a circuit

split, it is hard to know what is.

arene ROSSINI —

In the alternative, petitioners argue that the Ninth

Circuit’s decision in Hudson-Ram “could not create a

‘conflict’ requiring resolution by this Court” because it is

unpublished. Opp. 16. Respondents cite no authority for that

- proposition, which is not surprising because none exists. To

the contrary, this Court frequently reviews unpublished

decisions of the Courts of Appeals, including the Ninth

Circuit. See, e.g., Cooper Indus., Inc. v. Leatherman Tool

Group, Inc., 532 U.S. 424, 430 (2001) (reviewing

Leatherman Tool Group, Inc. v. Cooper Indus., Inc., 1999

WL 1216844 (9th Cir. Dec. 17, 1999) (unpublished)); Clark

Cty. Sch. Dist. v. Breeden, 532 U.S. 268, 269 (2001) (per

curiam) (reviewing Breeden v. Clark Cty. Sch. Dist., 2000

WL 991821 (9th Cir. July 19, 2000) (unpublished)); Behrens

v. Pelletier, 516 U.S. 299, 305 (1996) (reviewing Pelletier v.

Federal Home Loan Bank of San Francisco, No. 94-56507

(9th Cir. Nov. 17, 1994) (unpublished)); Spectrum Sports,

Inc. v. McQuillan, 506 U.S. 447, 452 (1993) (reviewing

McQuillan v. Sorbothane, Inc., 1990 WL 92599 (9th Cir. July

3, 1990) (unpublished)); Lampf, Pleva, Lipkind, Prupis &

Petigrow v. Gilbertson, 501 U.S. 350, 354 (1991) (reviewing

Catalan v. Paulson Inv. Co., No. 88-4099 (9th Cir. Feb. 5,

1990) (unpublished)); Portland Golf Club v. CIR, 497 U.S.

154, 159 (1990) (reviewing Portland Golf Club v. CIR, 1989

WL 61765 (9th Cir. June 1, 1989) (unpublished)); Torres v.

Oakland Scavenger Co., 487 U.S. 312, 314 (1988) (reviewing

Martinez v. Oakland Scavenger Co., No. 85-2903 (9th Cir.

Dec. 11, 1986) (unpublished)). Indeed, were the law

otherwise, a court of appeals could insulate its decision from

this Court’s review by simply declining to publish it. The

fact that the Ninth Circuit chose not to publish its decision in

Hudson-Ram (presumably because the statutory language on

which that decision is based is so straightforward) provides

no basis for declining to review the conflict between that

decision and the decision below.

Ill. This Case Presents Issues Of Signal Importance.

The welter of circuit splits described above underscores

how desperately this Court’s guidance is needed in this area

of the law, but should not deflect attention from the signal

importance of this particular case in its own right. This case

presents the question whether the American judiciary can

address “mass tort” claims—particularly asbestos claims—in

a fair and rational way. Right now, that is not the case: as the

Third Circuit noted more than six years ago,

The most objectionable aspects of asbestos litigation

can be briefly summarized: dockets in both federal

and state courts continue to grow; long delays are

routine; trials are too long; the same issues are

litigated over and over; transaction costs exceed the

victims’ recovery by nearly two to one; exhaustion of

assets threatens and distorts the process; and future

claimants may lose altogether.

Georgine v. Amchem Prods., Inc., 83 F.3d 610, 619 (3d Cir.

1996), aff'd, 521 U.S. 591 (1997). Since then, the problem

has only worsened, as the onslaught of asbestos claims has

engulfed not only asbestos manufacturers, but also “Main

Street” American businesses, including petitioners.

Respondents try to downplay the importance of this case

by arguing that global Daubert hearings on the scientific

validity of the friction product claims “can be conducted, if

the courts deem them useful, without petitioners’ being

present” in particular bankruptcy proceedings. Opp. 23.

That argument makes no sense. Congress granted the federal

bankruptcy courts “comprehensive jurisdiction” precisely so

that they “might deal efficiently and expeditiously with all

matters connected with the bankruptcy estate.” Celotex

Corp. v. Edwards, 514 U.S. 300, 308 (1995) (internal

quotation omitted). To conduct Daubert hearings with

respect to claims against the debtor, but not against parties

(like petitioners) with enormous contingent indemnification

and/or contribution claims against the debtor, would turn the

law upside down, because it would leave the bankruptcy

estate open to substantial additional liability.

That is precisely why the Sixth Circuit recognized in Dow

Corning that personal injury claims against nondebtors based

on products manufactured by the debtor are necessarily

“related to” the bankruptcy within the meaning of 28 U.S.C.

§ 1334(b). 86 F.3d at 488-94. As that court explained,

The claims currently pending against the nondebtors

give rise to contingent claims against [the debtor]

which unquestionably could ripen into fixed claims. -

The potential for [the debtor]’s being held liable to the

nondebtors in claims for contribution and

indemnification, or vice versa, suffices to establish a

conceivable impact on the estate in bankruptcy.

Claims for indemnification and contribution, whether

asserted against or by (the debtor], obviously would

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

bankruptcy proceedings will be pending, as well as

i

10

[the debtor]’s ability to resolve its liabilities and

proceed with reorganization.

Dow Corning, 86 F.3d at 494. The district court below

recognized that its holding denying “related to” jurisdiction

over the claims in this case was probably “impossible to

reconcile” with Dow Corning, which “came to the opposite

conclusion on a remarkably similar set of facts,” but opined

that the Sixth Circuit was “wrong.” Pet. App. 68a.

The Third Circuit acknowledged the conflict between the

district court’s ruling in this case and the Sixth Circuit’s

ruling in Dow Corning, Pet. App. 28a-29a, but held that

“[w]le . .. remain a step away from reaching the merits of

whether the District Court has ‘related to’ jurisdiction”

because appellate jurisdiction was lacking, id. at 30a.

Accordingly, the Third Circuit held only that petitioners

“have not met th[e] rigorous standard for the issuance of the

extraordinary writ of mandamus as to the District Court’s

denial of the motion to transfer,” id, thereby avoiding the

critically important question whether “related to” bankruptcy

jurisdiction extends to claims against nondebtors based on

products manufactured by the debtor.

In avoiding that question, however, the Third Circuit

seriously distorted basic principles of appellate jurisdiction,

and effectively gave district courts a roadmap for evading

appellate review of decisions involving bankruptcy

jurisdiction. This Court’s review is thus warranted not only

to resolve the welter of circuit splits described above, but to

prevent the vital underlying issues of bankruptcy jurisdiction

presented here from being wholly insulated from appellate

review.

CONCLUSION

For the foregoing reasons, this Court should grant the

petition for wnt of certiorari.

Respectfully submitted,

DAVID M. BERNICK CHRISTOPHER LANDAU

KIRKLAND & ELLIS Counsel of Record

200 E. Randolph Drive KIRKLAND & ELLIS

Chicago, IL 60601 655 Fifteenth Street, N.W.

(312) 861-2000 Suite 1200

Washington, DC 20005

(202) 879-5000

Counsel for Petitioners

December 17, 2002