It may not have been the most high-profile case of the term, but the arguments before the Supreme Court this morning in Travelers Indemnity Co. v. Bailey and the consolidated case Common Law Settlement Counsel v. Bailey packed the Supreme Court's lawyers' section with insurance and bankruptcy law practitioners among others. Even former New York Gov. Mario Cuomo, now of counsel at Wilkie Farr & Gallagher, was in the audience, though he was sitting in the public section, not the area reserved for members of the Supreme Court bar. (We're not sure if that was his choice, or if the lawyers' section was full.)
The case revisits the long-running asbestos litigation, beginning with the 1986 settlement that was reached with the bankrupt Johns-Manville Corporation to handle claims by those injured by exposure to asbestos. It has been touted -- including before the justices today -- as a model of success for compensating 660,000 claimants with more than $2.8 billion in payouts. Insurers contributed to the fund, and in return got immunity from the bankruptcy court from future claims related to their policies with asbestos makers.
But plaintiffs' lawyers later found other grounds on which to sue insurers including Travelers Indemnity. Travelers objected, asserting that the new claims were barred by the bankruptcy court's immunity order. After mediation conducted by Cuomo, Travelers agreed to fund a new $500 million trust for the new plaintiffs, in return for clarification that it would then be immune from still more claims. But some other plaintiffs who were not part of the new settlement objected, and last year the U.S. Court of Appeals for the 2nd Circuit ruled in the plaintiffs' favor, finding that the bankruptcy court lacked the power to immunize Travelers from the other claims. That set the stage for today's hearing.
The arguments before the Supreme Court were lively. Justice Ruth Bader Ginsburg was the most aggressive questioner, asking the lawyer for Travelers, Simpson Thacher & Bartlett partner Barry Ostrager, upward of 20 questions during his 30 minutes at the lectern, and calling it a "most mysterious case." She even scolded Ostrager mildly for beginning to answer her question before she had asked it. (If Ginsburg's March 17 announcement about her schedule for cancer chemotherapy still holds, she may have had her first treatment last Friday. If so, it did not affect her energy level or questioning during argument.)
Most justices seemed sympathetic toward Travelers, with Justice John Paul Stevens wondering what more the plaintiffs could possibly expect out of the company. "The fact that they defended cases certainly was proper for them as an insurance company," said Stevens. "This is a mysterious case to me.' Stevens also labeled the settlement program a success.
More than once, Justice Stephen Breyer also expressed concern that if the new claims are allowed against Travelers, other insurers would be reluctant to contribute to similar settlement funds in the future. "I can't imagine an insurance company in its right mind going into that when in fact all these suits are still open," Breyer told New York University School of Law professor Samuel Issacharoff, who represented the plaintiffs against Travelers. Issacharoff replied that Travelers had agreed to the settlement not knowing if it would receive protection from future claims.
A preview of the case from AmLaw's Litigation Daily appears here.
This case was about the limit of bankruptcy court jurisdiction to enjoin the world from taking state court action against non-debtors over property and interest not owned by the bankrupt’s estate? The high court’s decision on the limit of the bankruptcy court’s jurisdiction to issue such injunctions directly impacts the split opinion in the circuits over a successor liability injunction in a sale order.
Posted by: Robert White | April 04, 2009 at 04:05 PM