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Travelers Ins. Co. v. H.K. Porter Co.

filed: January 17, 1995.

TRAVELERS INSURANCE COMPANY, APPELLANT
v.
H.K. PORTER COMPANY, INC.; THE OFFICIAL COMMITTEE OF UNSECURED CREDITORS, OF H.K. PORTER COMPANY, INC.; AIKEN COUNTY PUBLIC SCHOOLS; ALTOONA AREA SCHOOL; DISTRICT; ANDERSON COUNTY PUBLIC SCHOOLS; BARNWELL SCHOOL DISTRICT #45; BEREA INDEPENDENT SCHOOL SYSTEM; BLACKWELL PUBLIC SCHOOLS; CENTRAL DAUPHIN SCHOOLS; CHARLESTON COUNTY PUBLIC BUILDINGS; CHARLESTON COUNTY PUBLIC SCHOOLS; CHESTER COUNTY PUBLIC SCHOOLS; DILLON COUNTY PUBLIC SCHOOLS; DYERSBURG CITY SCHOOLS; FAIRBANKS NORTH STAR BOROUGH; GEORGETOWN PUBLIC SCHOOLS; GREENVILLE HOSPITAL SYSTEM; GREENWOOD SCHOOL DISTRICT #51; HAMILTON COUNTY PUBLIC SCHOOLS; HORRY COUNTY PUBLIC BUILDINGS; HORRY COUNTY PUBLIC SCHOOLS; JASPER COUNTY PUBLIC SCHOOLS; KERSHAW COUNTY PUBLIC SCHOOLS; KERSHAW SCHOOL DISTRICT; LANCASTER COUNTY PUBLIC SCHOOLS; LEXINGTON COUNTY PUBLIC SCHOOLS; MT. LEBANON SCHOOL DISTRICT; NATRONA COUNTY SCHOOLS; ORANGEBURG SCHOOL DISTRICT #6; ORANGEBURG COUNTY PUBLIC BUILDINGS; PEKIN SCHOOL DISTRICT; RICHLAND COUNTY SCHOOL DISTRICT; ROWAN COUNTY PUBLIC SCHOOLS; UNIVERSITY OF SOUTH CAROLINA; WAKE COUNTY PUBLIC SCHOOLS; WASHINGTON COUNTY PUBLIC SCHOOLS; WILLIAMSBURG PUBLIC SCHOOLS



On Appeal from the United States District Court for the Western District of Pennsylvania. (D.C. Civil No. 93-01209).

Before: Hutchinson, Nygaard and Garth Circuit Judges.

Author: Garth

Opinion OF THE COURT

GARTH, Circuit Judge... :

H.K. Porter Company, Inc. ("Porter"), a debtor in bankruptcy, was, and evidently is presently, insured by Travelers Insurance Company ("Travelers"). Certain school district creditors (the "Claimants") filed proofs of claims in the Porter bankruptcy alleging property damage due to asbestos installations. At some point, believing that the prosecution of their claims against Porter would be costly and without commensurate benefit, some of the creditors withdrew their claims, and others defaulted.

Thereafter, on hearing of a possibility that Travelers, as Porter's insurer, might be required to respond for damage claims against Porter, the school district creditors moved to vacate their withdrawals/defaults. Their motions were granted by the bankruptcy court, but with a restriction limiting any recoveries to insurance proceeds only.

Travelers now asserts that the bankruptcy court's order reinstating the claims, but limiting any recovery to insurance proceeds: (1) is void for lack of service on Travelers as a "party against whom relief is sought"; (2) was the product of "collusive prosecution" between Porter and the Claimants; and (3) in any event constituted an abuse of discretion because the Claimants had not shown "good cause" why their claims should be reinstated.

We neither reach nor address these contentions. Rather, we hold that Travelers was not a "person aggrieved" by the bankruptcy court's order and hence lacked standing to appeal from it, both in this Court and in the district court. We will therefore dismiss Travelers' appeal.

I

The facts relevant to our resolution of this appeal are clear and not in dispute. Thus, our normal review of factual findings made by the lower courts and conducted under the clearly erroneous standard has little relevance here.

Porter, an asbestos manufacturer, filed a voluntary petition for relief under Chapter 11 on February 15, 1991. The Official Committee of Unsecured Creditors (the "Committee"), which included the Claimants' counsel, was appointed on March 8, 1991. The bar date for proofs of claim against Porter was set for March 16, 1992. On that day, the Claimants filed 38 asbestos-related property damage claims (the "claims") against Porter totaling $8,364,330.27.*fn1 Porter filed objections to all of these claims.

A subsequent review by Claimants' counsel of Porter's disclosure statements revealed that there were approximately $50 million in estate assets available to satisfy claims pending against the estate. These claims included a potential $26 to $28 million priority claim from the Internal Revenue Service and as many as 100,000 asbestos-related personal injury claims. Porter's schedule of assets was silent as to any insurance available to cover the property damage claims asserted by the Claimants.

In light of the limited assets of the estate, and in particular the absence of relevant insurance coverage, the Claimants determined that the potential recovery was outweighed by the probable cost of pursuing their claims*fn2 and, at the urging of the Committee and of Porter, decided not to defend against Porter's objections. Consequently, by two "default orders" dated May 22, 1992, and one "default order" dated May 26, 1992, three of the Claimants allowed their claims to be dismissed by default. App. 283, 293, 308. By order dated June 9, 1992 and styled "Agreed Order Withdrawing Claims," the remaining 35 Claimants withdrew their claims. App. 334.

Sometime following these orders, however, Porter's special insurance counsel discovered the existence of several insurance policies which he believed could potentially insure up ...


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