Saturday, December 1, 2012

In re Dow Corning Corp. case brief

 In re Dow Corning Corp. (6th Cir. 1996)
Facts: Dist Court held that it did not have “related to” jurisdiction over those claims under §1334(b) and concluded that they could not be transferred to it pursuant to §157(b)(5). On June 25, 1992, ND Alabama reached a class settlement. 440k elected to join the settlement, while several thousand π opted out. On May 15, 1995 Dow filed its petition in the ED Mich. This stayed all claims against it. However, claims against Dow’s 2 shareholders, Dow Chem. And Corning Corp., and the other nondebtors defendants were not stayed. Dow filed a motion to transfer to the ED Mich. The opt-out cases against it. The district court granted Dow jurisdiction motion under §1334(b) and permitted the transfer pursuant to §157(b)(5). However, the district court denied the other transfer motions by the shareholders because it claimed to lack SMJ for they were not “related to” Dow’s bankruptcy pursuant to §1334(b).

Issue: What is the subject matter jurisdiction of federal district courts, sitting as bankruptcy courts, over proceedings “related to” a case filed under Chapter 11 and the ability of federal DC’s to transfer such proceedings to the DC in which the bankruptcy case is pending? Did the DC err in its determination that claims for compensatory and punitive damages asserted in 100000’s of actions against numerous nondebtors manufacturers and suppliers of silicone gel breast implants could have no conceivable effect upon, and therefore were not related to, the bankruptcy estate of the Dow Corning corp?

Holding: Reversed and Remanded.

Analysis: Does the Court have Subj. Matter Jurisdiction? §1334(b) is read broadly. There must be some nexus b/t the related civil proceeding and the title 11 case. – PACOR. It includes “suits between 3rd parties which have an effect on the bankr. Estate.” Claims for Contribution and Indemnification are contingent and will have a conceivable effect on the bankruptcy proceedings. §362 stay against nonbankrupt co-∆ may be granted in “unusual circumstances.” This is the case here. Also, all three companies share joint insurance. Allowing the stay against Dow and not the other corps will dry up the estate for the creditors of Dow in the meantime.
  • A §157(b)(5) motion requires an abstention analysis
  • Abstention provision of §1334(c) qualify §1334(b)’s broad grant of jurisdiction
    • The DC determines each individual case whether hearing it would promote or impair efficient and fair adjudication of bankruptcy cases.
  • §1334 – 2 types of abstention
    • Discretionary Abstention 1334(c)(1)
    • Mandatory abstention 1334(c)(2)
      • Proceeding must be:
      • Based on a state law claim or cause of action
      • Lack a federal jurisdictional basis absent the bankrutpyc
      • Be commenced in a state forum of appropriate jurisdiction
      • Be capable of timely adjudication
      • Be a non-core proceeding
        • Non-core proceedings under §157b2B are not subject to §1334c2’s mandatory abstention provision pursuant to §157b4
  • The DC in this case determined that 157b4 rendered exempt from the mandatory abstention requirement all PI tort claims pending solely against Dow, and decided not to abstain discretionarily w/ regard to those claims at this time.
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