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Patricia Wright; Kevin West, On Behalf of Themselves v. Owens Corning

May 18, 2012

PATRICIA WRIGHT; KEVIN WEST, ON BEHALF OF THEMSELVES AND ALL OTHERS SIMILARLY SITUATED, APPELLANTS
v.
OWENS CORNING



Appeal from the United States District Court for the Western District of Pennsylvania (D.C. Civil Action No. 2-09-cv-01567) District Judge: Honorable Joy Flowers Conti

The opinion of the court was delivered by: Ambro, Circuit Judge

PRECEDENTIAL

Argued November 17, 2011

Before: RENDELL, AMBRO, and NYGAARD, Circuit Judges

OPINION OF THE COURT

This appeal concerns the application of our recent decision in JELD-WEN, Inc. v. Van Brunt (In re Grossman's Inc.), 607 F.3d 114 (3d Cir. 2010), establishing a new test for determining when a "claim" exists under the Bankruptcy Code, 11 U.S.C. §§ 1101 et seq. Plaintiffs Patricia Wright and Kevin West (collectively, the "Plaintiffs") filed a putative class action seeking damages related to defects in roofing shingles manufactured by Owens Corning.*fn1 The District Court granted Owens Corning‟s motion for summary judgment, determining that the Plaintiffs‟ claims were discharged under the confirmed reorganization plan (the "Plan") of Owens Corning and certain of its subsidiaries (collectively, the "Debtors"). Specifically, the Court held that, based on Grossman's, the Plaintiffs held "claims" under the Code, and that the published notices of the Debtors‟ Chapter 11 bankruptcy cases afforded them procedural due process. We agree that the Plaintiffs held claims under the Code, but, under the circumstances before us, disagree that they were afforded procedural due process. Hence their claims were not discharged. We thus affirm in part and reverse in part the Court‟s judgment, and remand the case for further proceedings.

I.Background

The Plaintiffs‟ story presents the challenge of administering unknown future claims in bankruptcy. In late 1998 or early 1999, Wright hired a contractor, who installed shingles manufactured by Owens Corning on her roof. In 2005, West similarly hired a contractor, who likewise installed shingles manufactured by Owens Corning on his roof. They both discovered leaks in 2009, and determined that the shingles had cracked. Each sent warranty claims to Owens Corning. It rejected Wright‟s claim in part and West‟s claim in full. In November 2009, Wright filed a class action against Owens Corning alleging fraud, negligence, strict liability, and breach of warranty. West later was added as a named plaintiff.

Meanwhile, back in October 2000, the Debtors filed their Chapter 11 bankruptcy petitions. In November 2001, the Bankruptcy Court set a claims bar date of April 15, 2002. All claimants were required to file proofs of claim on or before that date. It also approved a bar date notice, which was published twice in The New York Times, The Wall Street Journal, and USA Today, among other publications. The notice directed claimants to file proofs of claim if they held claims*fn2 that arose prior to the filing of the Debtors‟ bankruptcy cases. It specifically identified claims relating to "the sale, manufacture, distribution, installation and/or marketing of products by any of the Debtors, including without limitation . . . roofing shingles . . . ."

The Debtors‟ bankruptcy proceedings resulted in the filing of the Plan in June 2006. Soon after, the Bankruptcy Court approved notices of the confirmation hearing for the Plan, including a generic notice to most unknown claimants.*fn3

This notice was published in The New York Times, The Wall Street Journal, and USA Today, among other publications. It stated, in bold, that the Plan might affect the rights of holders of claims against the Debtors.

Two other notices of the Debtors‟ bankruptcy proceedings also were published. In June 2006, notice of the hearing to consider the disclosure statement was published in The New York Times, The Wall Street Journal, USA Today, and theToledo Blade. In November 2006, notice of the Plan‟s date of confirmation, September 26, 2006 (the "Confirmation Date"), was published in the same four publications. The Plan provided for the discharge of all claims relating to the Debtors under the Bankruptcy Code that arose before the Confirmation Date.*fn4 The order confirming the Plan (the "Confirmation Order") likewise provided that all claims arising before the Confirmation Date were discharged.

When the Plaintiffs filed their class action, there was little dispute as to the effect of Owens Corning‟s bankruptcy on the Plaintiffs‟ claims against it. Based on our much-maligned decision in Avellino v. M. Frenville Co. (In re M. Frenville Co.), 744 F.2d 332 (3d Cir. 1984), a "claim" under the Bankruptcy Code did not arise until a cause of action accrued under applicable non-bankruptcy law-that is, when a claimant possessed a right to payment. In this context, the Plaintiffs‟ cause of action did not accrue until the defects in the roofing shingles manifested in 2009, years after the Confirmation Date.*fn5 Thus, at the time they filed the class action, the Plaintiffs were correct to conclude that they did not hold "claims" under the Code based on the action. But subsequently we overruled Frenville with our en banc decision in Grossman's, in which we rejected Frenville‟s "accrual test," and in its place established the rule that a ""claim‟ arises when an individual is exposed pre-petition to a product or other conduct giving rise to an injury, which underlies a "right to payment‟ under the Bankruptcy Code." 607 F.3d at 125.

Based on Grossman's, Owens Corning filed its motion for summary judgment, arguing that the Plaintiffs‟ claims were discharged under the Plan and Confirmation Order. Before the District Court, the Plaintiffs argued that Grossman's is limited to asbestos-related cases, it does not apply retroactively, and they were not afforded due process because the notices of the bankruptcy proceedings were insufficient. The Court rejected ...


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