Introduction
On June 18, 2009 the United States Supreme Court ruled 7-2 that an injunction (the “1986 Injunction”) incorporated into the 1986 Johns-Manville Corp. (“Manville”) bankruptcy reorganization order (the “1986 Order”) barred claims made directly against Manville’s insurer, the Travelers Indemnity Company (“Travelers”), even though those claims were derivative of Travelers’ alleged wrongdoing, as opposed to that of Manville. See Travelers Indemnity Co. v. Bailey, ___ U.S. ___ (June 18, 2009) (Souter, J.) (copy available here). The Court held that: (a) the claims fell within the terms of the 1986 Injunction; and (b) the claimants were barred by res judicata from collaterally attacking the Bankruptcy Court’s subject-matter jurisdiction to enter the 1986 Order containing the 1986 Injunction. Slip op. at 1-2 & 9-10.
The decision should bring some degree of finality to Manville’s insurers’ exposure to asbestos-related claims, which has been a moving target for quite some time. The effect, if any, the decision may have on reinsurance claims and disputes is not yet clear. That said, now that Travelers’ liabilities presumably can more easily be quantified, cedents, retrocedents, reinsurers and retrocessionaires whose claims and liabilities are derived from Travelers’ and other Manville insurers’ liabilities might be in a better position to attempt to settle or commute those claims and liabilities. And, in a more general sense, the decision provides some guidance on how bankruptcy-court channeling-injunctions should be interpreted, and the extent to which, if at all, such injunctions may be collaterally attacked for lack of subject-matter jurisdiction. Continue Reading »
