Thomas P. Agresti, Judge, United States Bankruptcy Court.
Presently before the Court for decision following an extensive hearing, briefing, and argument is the
The dispute in this case stems from the bankruptcy of North American Refractories Company, or "NARCO," that was filed in this Court on January 4, 2002, at Case No. 02-20198.
Prior to and following Honeywell's acquisition of NARCO, many tort claims were filed involving diseases such as mesothelioma and other forms of cancer that were alleged to have been caused by exposure to asbestos contained in NARCO products. As part of the acquisition, there was an agreement between NARCO and Honeywell that acted to allocate responsibility between the two entities for these asbestos claims depending on the product involved in the particular claim. The agreement, as modified over time, functioned for a considerable period after the acquisition, but disputes between Honeywell and NARCO as to its scope and implementation eventually led to its termination in late 2001. As asbestos tort claims continued to be filed in larger numbers, the financial burden on NARCO and its parent corporation, Honeywell, was the precipitating reason for the bankruptcy filing.
On November 13, 2007, this Court, acting through the Honorable Judith K. Fitzgerald, entered an Order confirming the Third Amended Plan of Reorganization for NARCO ("the Plan"). See, NARCO main case Doc. No. 5508. That same date Judge Fitzgerald issued a Revised Memorandum Opinion ("RMO"), which included as Exhibit 1 Revised Findings of Fact and Conclusions of Law ("RFFCL"). See, main case Doc. No. 5507. The RMO and RFFCL together provide extensive information as to the procedural history of the case and the relevant factual background. The Court will refer freely to the RMO and the RFFCL where relevant.
The NARCO Trust
A key part of the Plan was the creation of the NARCO Asbestos Trust ("Trust") pursuant to 11 U.S.C. § 524(g), along with a corresponding "channeling injunction" that would serve to direct to the Trust all asbestos-related claims against NARCO, and Honeywell, that might otherwise have been brought as tort claims in the courts.
The Trust is to be a vehicle for the "equitable payment" of such asbestos-related claims, both "Pre-Established Claims" (generally speaking, those that had been settled or otherwise liquidated prior to the effective date of the Plan, which claims are not at issue with respect to the Motion) and all other claims. The Trust is governed by the NARCO Asbestos Trust Agreement ("TA") and the NARCO
The Trust is funded by receiving 79% of the common stock of the reorganized debtor entity, known as Reorganized ANH, and by cash payments to be made into the future by Honeywell. The Trust includes two claim funds, one the "Pre-Established Claim Fund" into which Honeywell must pay, without limit, whatever is necessary to pay all Pre-Established Claims; the other, the "Annual Contribution Claims Fund" for payment of all remaining claims.
As to the Annual Contribution Claims Fund, Honeywell is to pay into it as necessary to enable the Trust to pay the other claims, up to an annual cap amount, varying over time and ranging from $100 to $150 million. The Parties are in agreement that to date Honeywell has not had to pay anything into the Annual Contribution Claims Fund because thus far the Trust's existing assets have been sufficient to pay claims, though it is expected that beginning in 2016 Honeywell will have to start contributing monies per its agreement. In addition to its payment obligations as to the two claim funds, Honeywell is also obligated to pay for the administration of the Trust.
There are three trustees of the Trust. The initial group of Trustees, which remains in place to the present day, consists of Atty Richard Schirro, Mark Gleason, and the Hon. Ken Kawaichi. The Trustees are, of course, to act as fiduciaries and to administer the Trust in accordance with the TA and the TDP. Although the Plan was approved in 2007 and the Trustees were appointed at that time, due to delay caused by an appeal of the Plan confirmation, and the need for the Trust to develop an administrative framework for reviewing claims, it took several years for the Trust to become operational, with the first payment of claims beginning in early 2014. To assist it with the review and processing of claims, the Trust hired an entity known as CRMC to be its claim processor.
The Parties are in agreement that the Trust differs in a significant respect from asbestos-related trusts that have been created in other bankruptcy cases under the authority of Section 524(g). Typically, such trusts are funded by a fixed payment made into the trust by the settlor, who then essentially walks away and has no further role or interest in how the trust is administered and pays claims. The Trust in the present case by contrast is "evergreen" in the sense that Honeywell's payment obligation, except for the annual caps mentioned above, is ongoing and "unlimited" until termination of the Trust.
The various disputes in this case all relate to the operation of the Trust. Honeywell's very comprehensive Complaint
Claims Under the Trust
To better understand the dispute between the Parties as involved in the Motion, it will be helpful to take a step back and first look at the big picture. As indicated above, there are two separate claim funds under the Trust, one to pay Pre-Established Claims and the other to pay all remaining claims. The issues raised by the Motion involve only claims payable from the latter, the Annual Contribution Claims Fund. Claims payable out of that fund may be further broken down into those filed under the "Expedited Review" process, See, TDP § 4.3(a), and those filed under the "Individual Review" process, See, TDP § 4.3(b). In broad terms, claims filed under the Expedited Review process are subject to an "expeditious" and "less burdensome" approval and if approved can result in payments of a fixed but relatively modest amount,
Expedited Review claimants are required to provide both medical evidence demonstrating the disease suffered by the claimant,
Honeywell argues, and the Trust largely agrees, that the first phrase quoted above establishes that there are actually two prongs to the exposure evidence requirement under the TDP: the presence prong and the occupational exposure prong. First, the claimant must establish that NARCO asbestos-containing products ("NACP") were present at the work site where the claimant was employed during the relevant period of time. This presence prong can be met either by showing that the claimant worked at a site on the "Work Site List"
Occupational Exposure Issue
The first issue raised in the Motion relates to how the Trust seeks to address the exposure evidence requirement when reviewing a subset of Expedited Review claims in which the claimant worked at a site on the Work Site List, thereby establishing the presence prong, but was not in one of the presumptive occupations for purposes of establishing occupational exposure and does not identify a specific NACP. More specifically, the Trust would find that such claimant could possibly meet the occupational exposure requirement by submitting evidence to show the claimant worked around or in the vicinity of "refractory products," even though no specific NACP has been identified. Honeywell has dubbed this the "refractory inference" and argues that it violates the TDP and results in an improper expansion of the universe of claims that can be approved.
Competent Evidence Issue
The second issue raised in the Motion is the meaning of the term "competent evidence" as used in the second quoted phrase from the TDP concerning the exposure requirement for Expedited Review claims. Honeywell takes the position that this is a term of art that should be construed
Current Status of Claims
The above are the two main issues the Court must consider when deciding whether to grant the Motion and issue a preliminary injunction that would to some extent dictate how the Trust is to process claims pending a final decision in this case. Before turning to a legal discussion of those issues, however, it must be noted that as a result of the litigation process, including expedited discovery, that has been ongoing for several months since the Motion was filed has had the salutary effect of getting the Parties to significantly narrow the scope of their dispute.
The Motion itself refers to 481 pending claims totaling approximately $10.2 million as being at issue.
Preliminary injunctive relief is an "extraordinary remedy" that should be granted only in limited circumstances, and never as of right. Groupe SEB USA, Inc. v. Euro-Pro Operating, LLC, 774 F.3d 192, 197 (3d Cir.2014), Ferring Pharmaceuticals, Inc. v. Watson Pharmaceuticals, Inc., 765 F.3d 205, 209 (3d Cir.2014). In order to obtain preliminary injunctive relief, the party seeking it, here Honeywell, must establish:
Winter v. Natural Resources Defense Council, Inc., 555 U.S. 7, 20, 129 S.Ct. 365,
The Court will begin its examination of the required elements, in the context of the present case, with the irreparable harm factor because it finds that Honeywell's Motion founders most obviously regarding that issue.
(A) Irreparable Harm
The irreparable harm requirement for a preliminary injunction is met if a plaintiff demonstrates a significant risk that it will experience harm that cannot adequately be compensated for after the fact by monetary damages. Adams v. Freedom Forge Corp., 204 F.3d 475, 484-85 (3d Cir.2000). The Adams court went on to comment that this is not an easy burden to meet, id. and in finding that the plaintiffs involved in the case had not met their burden, it stated:
204 F.3d at 487 (citations omitted, emphasis added by Adams court).
An important corollary that follows from the general rule stated above is that ordinarily an injury that is measured solely in monetary terms cannot constitute the sort of "irreparable harm" that is required for the issuance of a preliminary injunction. See, e.g., Liberty Lincoln-Mercury, Inc. v. Ford Motor Co., 562 F.3d 553, 557 (3d Cir.2009) ("We have long held that an injury measured in solely monetary terms cannot constitute irreparable harm.").
On its face, this presents a clear problem to Honeywell in the present case because the only harm it is claiming as a result of the complained of actions of the Trust is monetary. Specifically, Honeywell argues that without preliminary injunctive relief the Trust will improperly pay claims, resulting in Honeywell having to expend more money in its contributions to the Trust than it otherwise would have to expend if the TA and the TDP were being faithfully implemented. Honeywell alleges no other type of harm but a monetary one. How then does Honeywell propose that it has established the existence of irreparable harm? Honeywell asserts that the monetary loss it will experience cannot subsequently be recovered once the Trust pays the disputed claims and therefore argues that this feature distinguishes
In other words, if no preliminary injunctive relief is granted, and if Honeywell's position on the proper standard to be applied in evaluating the claims at issue is upheld over the approach that the Trust would otherwise apply, in the meantime the Trust will presumably have paid out a number of claims that by right should not have been paid. Furthermore, it appears to be undisputed that once such claims are paid, absent claimant fraud, they cannot subsequently be recovered from the claimant if it is later determined that an improper standard was used by the Trust.
Assuming, arguendo, that Honeywell will succeed on the merits, the question for the Court then becomes whether the improper but irretrievable claim payments that would be made by the Trust pending a final decision in this case would constitute irreparable harm to Honeywell sufficient to support the issuance of a preliminary injunction.
As noted, a purely economic injury that is compensable in money generally does not satisfy the irreparable injury requirement. See, e.g., Minard Run Oil Co. v. U.S. Forest Service, 670 F.3d 236, 255 (3d Cir.2011). Some courts have recognized, however, that in certain instances when an economic injury will not be recoverable, that may be enough to support a finding of irreparable injury to support the entry of a preliminary injunction. The key inquiry in such cases is whether the unrecoverable economic injury is of such nature or magnitude that it will cause serious or special harm to the plaintiff, for example by threatening the plaintiff's solvency or requiring it to undergo substantial changes in its operations. Absent such a significant impact, a purely economic injury even if unrecoverable, is insufficient irreparable
For instance, in Coca-Cola Bottling of Shreveport, Inc. v. Coca-Cola Co., 563 F.Supp. 1122 (D.Del.1983), the plaintiffs were regional bottlers that were involved in a dispute with the defendant soft drink manufacturer ("Coca-Cola") surrounding the latter's introduction of the then-new "Diet Coke." The relationship between Coca-Cola and various bottlers around the country was governed by contracts that were established pursuant to a 1921 consent decree, which contracts included pricing formulas for the syrup that Coca-Cola sold to the bottlers who then used it to make soft drink products. The dispute at issue concerned Diet Coke syrup, and whether its sale was subject to the provisions of the existing contracts.
Coca-Cola took the position that the Diet Coke syrup was not within the scope of the existing contracts, and that therefore new terms with "flexible pricing" would have to be developed. When some bottlers objected and argued that they should be entitled to buy the Diet Coke syrup under the terms of the existing contracts, Coca-Cola proposed a "Temporary Amendment" to the existing contracts as an interim measure. Under the Temporary Amendment, Coca-Cola would sell the Diet Coke syrup to the bottlers at a set price (higher than under the existing contracts), without prejudice to the bottlers being able to challenge in court whether the existing contracts, in fact, controlled. The Temporary Amendment also provided, however, that the bottlers irrevocably waived any right to seek reimbursement of any overcharges they incurred in the interim should it ultimately be judicially determined that the pricing under the existing contracts controlled.
The plaintiff bottlers in the Shreveport case refused to sign the Temporary Amendment with this waiver of damages provision included. They sought a preliminary injunction whereby the Court would permit them to buy the Diet Coke syrup at the price offered in the Temporary Amendment, but without having to waive their right to seek recovery of any overcharges that might accrue during the case. The Shreveport court found or assumed that the bottlers had shown a likelihood of success on the merits, and it then turned to the issue of irreparable harm. The bottlers pointed to a number of potential harms, but the court found that all of them could be eliminated by signing the Temporary Amendment, leaving as the sole remaining question for the court whether the "irrevocable loss of monetary damages [can] justify the grant of a preliminary injunction?" Id. at 1141.
In answering that question in the negative, the Shreveport court quoted as follows from a Third Circuit case that it stated had addressed that very question:
Id. (quoting A.O. Smith Corp. v. Federal Trade Commission, 530 F.2d 515, 527-28 (3d Cir.1976).
It is apparent from the above quote that the A.O. Smith case arose in the context of unrecoverable costs that would be incurred by the plaintiff in complying with a governmental regulation that it was challenging. The Shreveport court nevertheless found the basic principle set forth in A.O. Smith to be equally applicable in a private breach of contract action. Thus, the Shreveport court found that to justify the grant of a preliminary injunction on the basis of irreparable harm premised on an irrevocable monetary loss, the bottlers would have to show that the loss they would suffer if the waiver language were not enjoined would be "special, peculiar, or work an onerous hardship." U.S. ex rel. Cosey v. Wolff, 562 F.Supp. 140, 142 (N.D.Ill.1983). Finding no such showing had been made, the Shreveport court denied the requested preliminary injunction. See also, e.g., Northern Air Cargo v. U.S. Postal Service, 756 F.Supp.2d 116, 125 (D.D.C.2010) (plaintiff alleging irrecoverable loss must nevertheless also demonstrate that its business would suffer "great" harm in the absence of interim injunctive relief; put another way, the injury must be more than simply irretrievable, it must also be serious in terms of its effect on the plaintiff); Sterling Commercial Credit-Michigan, LLC v. Phoenix Industries I, LLC, 762 F.Supp.2d 8 (D.D.C. 2011) (even unrecoverable losses must have a "serious" effect on plaintiff in order to be considered irreparable for purposes of preliminary injunction); Holiday CVS, L.L.C. v. Holder, 839 F.Supp.2d 145 (D.D.C.2012) vacated and remanded, 493 Fed.Appx. 108 (D.C.Cir.2012) (fact that economic losses may be unrecoverable does not, in and of itself, compel a finding of irreparable harm; harm must also be "great, certain, and imminent").
The Court sees no reason why this test should not be applied in the present case to determine whether unrecoverable monetary loss can suffice to show irreparable harm. As indicated above, the Court will assume that Honeywell has demonstrated that it will incur economic loss that cannot be recovered if a preliminary injunction is denied and the Court ultimately finds in its favor on the merits. The question though, is whether it has also demonstrated that such loss would have a special, peculiar or particularly damaging effect on its business operations beyond a simple diminution in profits. The Court finds that Honeywell has failed to make such a demonstration. There was absolutely no evidence presented at the hearing on the Motion that the amount of potentially unrecoverable loss that is at issue here would threaten Honeywell's solvency, seriously damage its business operations, or cause it any other sort of special, onerous or peculiar hardship, such as damage to its goodwill or reputation.
Furthermore, it is highly doubtful that Honeywell could have made such a showing even if it had tried to do so. When the Motion was filed, Honeywell alleged that there were several hundred disputed claims with a collective value of approximately $10.2 million that were subject to the voluntary "hold" it had negotiated with the Trust during the ADR proceedings that the parties had engaged in prior to the filing of this case. See, Motion at ¶ 24. That would have represented the ceiling of possible unrecoverable loss by Honeywell under an unlikely "worst case" scenario in which the Trust paid every disputed claim once the hold was lifted and it was later determined that none should have been
While $750,000 million might be viewed as a large amount from the perspective of an individual person or a small business, the Court must view it within the context of Honeywell's overall financial condition, including its financing commitment to the Trust. See, e.g., Mylan Labs., Inc. v. Leavitt, 484 F.Supp.2d 109, 123 (D.D.C. 2007) (monetary figures are relative, and depend for their ultimate quantum, on a comparison with the overall financial wherewithal of the corporation involved). Honeywell did not provide any evidence going to its general financial condition.
There is, however, evidence of record going to the level of financial commitment that Honeywell made in agreeing to fund the Trust. The Trust points out that Honeywell's own expert in support of Plan confirmation, Doctor Francine Rabinovitz, filed a declaration under penalty of perjury, which was credited by the Court in confirming the Plan, in which she opined that the present value of the contributions that Honeywell could expect to pay out over the Trust's lifetime in satisfaction of the financial commitment it was making was approximately $2.37 billion.
In other cases, courts have found irrecoverable losses of proportionally far higher magnitude to be insufficient to demonstrate irreparable harm. See, e.g., ConverDyn v. Moniz, 68 F.Supp.3d 34, 48-49 (D.D.C.2014) (alleged loss of $10 million per year was not of sufficient magnitude to show irreparable harm to plaintiff with annual revenues of $100 million). The Court therefore is constrained to find a $750,000 unrecoverable loss to Honeywell to be de minimus in the circumstances of this case. Compare, Norfolk S. Corp. v. Oberly, 594 F.Supp. 514, 521 (D.Del.1984) (daily unrecoverable loss of $11,000 incurred by plaintiff in complying with allegedly unconstitutional state law represented on an annualized basis less than 1% of plaintiff's pre-tax earnings and did not establish irreparable harm); Phillips Petroleum Co. v. U.S. Steel Corp., 566 F.Supp. 1093 (D.Del.1983), aff'd. 727 F.2d 1120 (Fed.Cir.1983) ($700,000 per year in unrecoverable patent royalties that would have to be paid pendente lite did not constitute irreparable harm where U.S. Steel made no attempt to show, nor had the court any reason to believe, that such payments "would be in any way special, peculiar or onerous").
The Court thus finds that Honeywell has clearly failed to establish that a denial of preliminary relief would lead to the sort of irreparable harm that is necessary in order to support the issuance of a preliminary injunction. Since irreparable harm is a sine qua non for preliminary injunctive relief, the Court could simply stop its analysis here and deny the Motion. See, e.g., Maximum Quality Foods, Inc. v. DiMaria, 2014 WL 6991967 (D.N.J. Dec. 10, 2014) (after finding that plaintiff failed to show irreparable harm, denying application for TRO and preliminary injunction without considering the remaining 3 preliminary injunction factors). However, for the sake of completeness the Court will go on to examine the remaining elements.
(B) Likelihood of Success
To demonstrate a likelihood of success on the merits, Honeywell must make out a prima facie case showing a reasonable probability that it will prevail on the merits. See, American Freedom Defense Initiative v. Southeastern Pennsylvania Transportation Authority, 92 F.Supp.3d 314, 321 (E.D.Pa.2015).
In analyzing this element, the Court begins by reiterating what was previously noted, i.e., to the credit of both Honeywell and the Trust, circumstances have substantially changed during the several months that have elapsed since the Motion was filed. The number of disputed claims have been significantly reduced and the Trust has decided it will no longer accept "check-the-box" or rote "form" affidavits as sufficient to support Expedited Review claims. Additionally, counsel for the Trust made the representation at the final argument on the Motion that even without a preliminary injunction the Trust would voluntarily
The Court understands the foregoing to mean that the Trust will not, as a matter of blanket policy, simply and uncritically accept a bare assertion that the claimant worked around refractory products as sufficient to meet the exposure standard under the TDP. Instead, the Trust will evaluate claim submissions on a case-by-case basis, considering the totality of evidence that is presented in support of the claim and drawing inferences therefrom. Finally, in an effort to address transparency issues, the Trust has now instituted a "one-way mirror" system that purportedly allows Honeywell to monitor the progress of individual claims as they proceed through the Trust's review process.
Unfortunately for Honeywell, solely in the context of considering the Motion but not in the overall context of its concerns, an examination of the likelihood of Honeywell succeeding on the merits must be done based on the current circumstances, and not the circumstances as they existed at the time the Motion was filed. This follows from the well-recognized principle that a court has the authority to modify an injunction when changed circumstances make the injunction unnecessary or inappropriate. Favia v. Indiana University of Pennsylvania, 7 F.3d 332, 337 (3d Cir.1993). If the Court were to weigh Honeywell's likelihood of success using circumstances that no longer pertain, any preliminary injunction that might be issued would be immediately subject to a motion for modification. To avoid such an absurd result the Court must therefore acknowledge and apply the current circumstances.
The issues raised by Honeywell in the Motion ultimately come down to a determination by this Court as to whether the Trust is acting consistent with the TA and TDP in the way it is now interpreting and applying the exposure and competent evidence requirements. While the Trust was created as part of the Plan, pursuant to the authority conferred under Section 524(g), the TA itself specifies that the Trust is intended to be a statutory trust under Chapter 38 of Title 12 of the Delaware Code, 12 Del. C. § 3801, et. seq. ("the Delaware Statutory Trust Act" or "DSTA"). See, TA at Art. 2.1. The TA even provides for the appointment of an additional "Delaware Trustee" if necessary to comply with the requirements of Delaware law. Id. at Art. 5.12. Furthermore, the TA provides that the Trust is to be "governed by, and construed in accordance with, the laws of the state of Delaware." Id. at Art. 8.13. See also, TDP at Section 7.4 (administration of TDP shall be governed by and construed in accordance with the laws of Delaware). None of the Parties have questioned the effectiveness of these choice of law provisions. It therefore
The Delaware Statutory Trust Act provides:
Del. Code Ann. Tit. 12, § 3809 (West). The Parties have not pointed to anything in the TA or the TDP that they contend alters Delaware law as to a court's role in reviewing the actions of a trust, nor do they contend that there is any applicable provision in the DTSA itself that would do so. At least for purposes of the Motion, then, the Court will proceed on the assumption that the general Delaware law pertaining to trusts is the law that must be applied.
The "seminal rule" of construction in trust cases under Delaware law is that the settlor's intention controls the interpretation of the instrument.
Under the TA, the settlors of the Trust are identified as NARCO, Honeywell, and ANH. See, TA Art. 2.1. It must nevertheless be recognized that in this particular instance the settlors did not simply create the Trust in a vacuum or a unilateral fashion. The Trust was created in the context of a bankruptcy proceeding whose main purpose was to address the flood of asbestos-related tort litigation that was affecting NARCO, and by direct extension its parent Honeywell, after the breakdown of the cost-sharing agreement that had previously been in place between the two entities. Extensive negotiations as to the terms of the Trust presumably occurred among the interested constituency groups before it was created, and representations as to what it would and would not do vis-a-vis future asbestos claimants were made to the creditors and the Bankruptcy Court before it was approved as part of the confirmed Plan. These are certainly "circumstances surrounding [the Trust's] creation" that the Court is required to be mindful of when interpreting the TA and the TDP.
The problem for Honeywell is that little if any admissible testimonial evidence was presented at the hearing on the Motion as to the circumstances surrounding the creation of the Trust. While there were some assertions by Counsel for Honeywell at the hearing and argument to the effect that Honeywell had agreed to the evergreen feature of the Trust only because of a very stringent claim review process embodied in the TDP, which process would absolutely preclude a claimant who was not in a presumptive occupation from making a recovery unless the claimant could name a specific NACP, admissible testimonial evidence
Relevant documentary evidence does exist in the record concerning the circumstances surrounding the creation of the Trust, and in the Court's view, it at least raises some questions as to whether the TDP was intended to be as strictly construed as Honeywell contends. For example, a Declaration by Peter M. Kreindler, who was then the Senior Vice-President and General Counsel of Honeywell, was submitted in support of the Disclosure Statement and Plan on May 23, 2006. See NARCO main case Doc. No. 4354.
The available documentary evidence also demonstrates that due to the product naming practices used by NARCO it may not be easy for claimants to name a NACP. For instance, in a part of the Kreindler Declaration explaining the dispute that NARCO and Honeywell were having over which was responsible for particular claims pursuant to their cost-sharing agreement, the following appears:
See, Kreindler Declaration at ¶ 23(c). This is certainly a relevant circumstance surrounding the creation of the Trust and it raises a number of potential questions. Is it realistic to expect claimants to name a specific NACP in light of the NARCO product-naming practices? If not, should the TDP be interpreted in a manner that could lead to a harsh and unreasonable result? What does the phrase "specific asbestos-containing product manufactured, sold or distributed by NARCO" in Section 4.7(b)(1) of the TDP mean in light of the NARCO product-naming practices? Does the required level of specificity required by the TDP lie at the level of an individual product (e.g., Narcogun CM-343), or at a family of products (e.g., Narcogun), or at a class of products (e.g., "refractory products")? None of these questions can be evaluated to the Court's satisfaction at this point in the case because of insufficient evidence as to the circumstances surrounding the creation of the Trust.
The other substantive issue raised by Honeywell in the Motion relates to the meaning of the term "competent evidence" in Section 4.7(b)(1) of the TDP with regard to the exposure evidence a claimant must submit. Honeywell argues that the term should be given its "ordinary legal meaning," which it states is evidence that would be "admissible" evidence in the courts. It appears that Honeywell's chief concern in this regard is that, at least until recently, the Trust had not articulated any standard for determining what is competent evidence, and had not communicated any instructions to CRMC as to how it should evaluate whether evidence meets the competent requirement. Honeywell expressed particular concern that such a lack of any standard could lead to the acceptance of affidavits or other evidence that are based on hearsay, or even multiple hearsay, rather than any personal knowledge. Honeywell does acknowledge that the situation has improved recently in that CRMC has added a dropdown menu on the claim web site for "personal knowledge," which Honeywell says is a tacit admission that the competent evidence standard requires personal knowledge.
This again appears to be an issue where the current circumstances as to how evidence is actually being reviewed is much less problematic than were the conditions that may have prevailed at the time the Motion was filed. The Trust seems to have now acknowledged that there is an evidentiary standard under the TDP that must be applied and has taken steps to do so. There is still disagreement between the Parties as to exactly what that evidentiary standard should be, but the divide has narrowed.
As to the particular question of whether "competent" evidence should mean only judicially admissible evidence as Honeywell argues, the answer is not clear. Certainly, equating competent evidence with admissible evidence is one possible interpretation of the term. On the other hand, the Trust correctly points out that in approving the Plan the Court noted that the Trust offered claimants with legitimate claims a definite path to recovery without the intervening burdens of "prosecution and proof in the tort system." That does suggest a more relaxed evidentiary regimen was intended for claims presented to the Trust but not a total elimination of certain, applicable standards.
Moreover, it is worth pointing out that, in addition to exposure evidence, the TDP also includes a requirement for "competent"
In short, without a better grasp on the circumstances surrounding the creation of the Trust than the evidence to date has provided, the Court is not in a position at this point to interpret the TA and the TDP in accordance with the applicable standard required under Delaware law. Consequently, the Court cannot conclude that Honeywell is likely to succeed on the merits. See, e.g., Bruni v. City of Pittsburgh, 91 F.Supp.3d 658 (W.D.Pa.2015) (motion for preliminary injunction denied where there was insufficient evidence in the record to support a conclusion that plaintiffs established a likelihood of success on the merits); Fonda Group, Inc. v. Erving Industries, Inc., 897 F.Supp. 230 (E.D.Pa. 1995) (preliminary injunction denied where agreement at issue was susceptible of reasonable but conflicting interpretations and intention of parties needed to be developed more fully).
(C) Balance of Equities
In applying this factor a court should "consider whether granting the requested relief will result in greater harm to the party on whom it is imposed than its denial will have on the party who seeks it." In re Advanced Marketing Services, Inc., 360 B.R. 421, 428 (Bankr.D.Del.2007). This factor does not tip strongly in either direction. For the reasons discussed extensively above, the Court has already concluded that Honeywell will not suffer irreparable harm if the Motion is denied, and that in fact the harm it will experience can accurately be described as de minimus when viewed in the context of the overall financial commitment that Honeywell has made to fund the Trust. If the Motion were granted, the Trust per se (as opposed to affected claimants) would see little actual harm, that being the slight, temporary imposition on its power and discretion that a preliminary injunction would engender. Thus, as between the two main Parties to the case, the Court sees relatively little harm to them regardless of how the Motion is decided, and no strong differential in magnitude as to such harm. This factor is neutral under the facts of the case.
(D) Public Interest
Honeywell argues that the public interest favors granting preliminary injunctive relief because the public has a strong interest in seeing that contract rights are respected. That is undoubtedly true in a broad sense, but since the Trust and channeling injunction were both created under the auspices of the Bankruptcy Code, and in particular 11 U.S.C. § 524(g), the public interest in seeing that the intent of that statute is fulfilled must also be considered. In In re W.R. Grace & Co., 729 F.3d 311,
If the preliminary injunctive relief that Honeywell seeks was granted, it would primarily, if not exclusively, affect the group of future claimants. Having already had their ability to pursue Honeywell in the tort system abrogated by the issuance of the channeling injunction, and having had the processing of their claims with the Trust effectively frozen for an extended period by the voluntary "hold" agreed to by the Parties, many of these future claimants would now see their ability to obtain a recovery from the Trust further delayed indefinitely while the Parties' litigation battle proceeds.
If the Court were strongly convinced that Honeywell will ultimately succeed on the merits, such a delay might nevertheless be justifiable from a public interest standpoint. However, as has been discussed above, the Court has not been convinced as to that level of Honeywell's prospects for success. Given the uncertainty regarding the final outcome of the case, and considering the Congressional concern for the due process rights of future claimants, the Court finds that the public interest would be best served by a denial of the Motion. While this denial will potentially burden Honeywell in that between now and the end of the case some claims may get paid that should not have been paid, the alternative of imposing an indefinite delay in payment on all affected claimants would be worse.
Although the Court is finding in favor of the Trust in this discreet matter, this result should by no means be viewed as an endorsement of all of its actions to date. Some of the evidence that was presented at the hearing on the Motion did not reflect well on the Trustees' execution of their duties in implementing the Trust. There appears to have been a certain lack of transparency by the Trust at the outset that perhaps contributed to Honeywell's suspicion of the Trust's activities. A prime example was the confusing manner in which the so-called "refractory inference" was adopted by the Trust. The dual track that this took, with one hand of the Trust seemingly not knowing what the other was doing, led Honeywell to believe, perhaps not unreasonably, that it was being deceived by the Trust. The evidence presented at the hearing demonstrated that the Trust was not acting with any intent to deceive, and to its credit Honeywell thereupon retracted any allegation in that regard, but at the very least the Trust's actions were sloppy.
Perhaps even more troubling to the Court than the initial lack of transparency was the way that the Trustees seemed to farm out their fiduciary obligations to CRMC. When questioned as to their actions, a right clearly held by Honeywell under the TA and TDP, the Trustees appeared to take on a somewhat arrogant course and "bunker mentality" toward sharing information with Honeywell. As well-compensated professionals, the Trustees
Although collectively the trustees had amassed considerable experience in administering the typical asbestos trust situation, admittedly, the administration of an evergreen trust was a new endeavor for them. Possibly this explains the trustees' motivation in handling their fiduciary responsibilities prior to the institution of this litigation. Obviously, hindsight gives the Court the benefit of "20/20 vision" and since reopening this case, the Trust has been extremely cooperative in resolving many of the outstanding issues between the Parties resulting in a significant narrowing of the issues all as previously noted.
The decision on the Motion should also not be viewed as a foreshadowing of how the Court may ultimately rule on the merits of the claims raised in Counts I through IV of the Complaint. As indicated above, the Court relies primarily on the lack of irreparable harm to Honeywell as its reason for denying preliminary injunctive relief, and secondarily on Honeywell's failure to show a likelihood of success on the merits because of insufficient evidence going to the circumstances surrounding the creation of the Trust. The Court believes the current manner in which the Trust is processing claims is at least minimally protective of Honeywell's rights so as to permit a denial of the Motion, though this should by no means be taken as indicating one way or the other whether the Trust's procedures will be found to be in full compliance with the TA and the TDP once a full evidentiary record has been presented.
For all of the above reasons the Motion will be denied without prejudice. An appropriate order follows.
___ APPENDIX "1" ___
TDP Section 4.7(b) Exposure Evidence
Claims based on conspiracy theories that involve no exposure to an asbestos containing product produced by NARCO or its predecessors are not compensable under this NARCO Asbestos TDP. In
(A) Industry/Occupation: NARCO had a specialized product line, manufacturing and distributing refractory products, for use in high heat applications. Because of the specialized nature and use of NARCO asbestos-containing product, the NARCO Asbestos Trust shall consider that there is a limited universe of occupations in a similarly limited range of industries in which claimants are likely to have been either directly or indirectly exposed to NARCO or its predecessors' asbestos-containing refractory products.
(B) Type of Industrial Exposure: The NARCO Asbestos Trust shall consider the lesser exposure to a NARCO asbestos-containing product of claimants with mixed industrial exposures. A claimant will have a "mixed industrial exposure" where he or she worked for some period of time in an industry where refractory products were typically used and in an occupation where direct or indirect exposure to such products was likely, and also worked for some
10. The "Worksite List" attached to this TDP is composed of sites that were either (1) included on the draft of the Worksite List acceptable to Honeywell as of February 23, 2005; or (2) locations at which both plaintiffs alleged, before the Petition Date in the tort system, that NARCO asbestos-containing product was present, and as to which NARCO, prior to the Petition Date, settled claims based upon the allegations of exposure at that location. The Worksite List acceptable to Honeywell as of February 23, 2005 sets forth the applicable date range for each site. The date range associated with each other site on the Worksite List is the earliest date of alleged NARCO exposure at a given site which NARCO settled pre-petition. The last date associated with each site is either the latest date of alleged NARCO exposure at that site which NARCO settled pre-petition plus ninety (90) days, or October 31, 1980. The "Worksite List" may be modified by the agreement of the NARCO Asbestos Trust Trustees, the NARCO Asbestos TAC, the NARCO Asbestos Future Claimants Representative, and Honeywell, consistent with the consent provisions of the NARCO Asbestos Trust Agreement, including Section 3.2(e).
11. As used herein, "Co-worker" shall mean one or more individuals who provide competent sworn testimony (I) that the claimant worked with or around refractory products and (ii) that asbestos-containing products manufactured or distributed by NARCO were present at the worksite during the relevant period. A Co-worker's affidavit must provide evidence sufficient to show that the Co-worker meets this definition.