CHARLOTTE – U. S. District Judge Robert Conrad dismissed an appeal of a $402,871.70 sanction that bankruptcy Judge Laura Beyer imposed on Maune Raichle asbestos firm of St. Louis.
Conrad found he lacked jurisdiction because he couldn’t consider Beyer’s order final.
Beyer held Maune Raichle in contempt last year for disobeying an order to answer questionnaires of Georgia Pacific entity Bestwall.
Conrad found the number of contested matters and discrete disputes in bankruptcy cases is endless, such that an order in each contested matter is not final.
“In other contexts, a party to litigation may not immediately appeal contempt orders related to discovery orders,” he wrote.
Bestwall petitioned to reorganize in 2017, after George Pacific divided into New GP with operating assets and Bestwall with asbestos liabilities.
Bestwall moved for trial to estimate liabilities.
Asbestos firms opposed it, claiming Beyer could estimate future settlements on the basis of past settlements.
Bestwall claimed fraud tainted past settlements because many plaintiffs alleged one set of exposures in private trusts and another set in civil courts.
Beyer granted estimation and Bestwall moved to send questionnaires to asbestos firms about each client’s exposures and settlements.
Beyer granted it in March 2021, and asbestos firms appealed to Conrad.
He dismissed the appeal in May 2021, finding Beyer’s order wasn’t final.
Maune Raichle clients from Illinois sued for an injunction in Southern Illinois district court in June 2021.
Former district judge Patrick Murphy of Marion and former magistrate judge Stephen Williams of Belleville filed the complaint.
District Judge Staci Yandle set a hearing on a preliminary injunction for July 23, 2021.
Bestwall filed an emergency motion in Charlotte and on July 22, 2021, Beyer found the Illinois parties in civil contempt.
She ruled that they could purge their contempt by dismissing the Illinois action.
The next day in Benton, Murphy said Yandle’s court was the only one with jurisdiction.
He said while bankruptcy judges could extend subpoenas outside their jurisdiction, “your court is the court that has to determine if service was proper.”
He said Bestwall usurped her authority to look after citizens of her district.
Yandle said there was no subpoena for her to address.
Murphy said Bestwall avoided due process by saying it didn’t need a subpoena and they’d just send interrogatories.
Yandle asked what personal jurisdiction she had over Bestwall.
Murphy said, “They are demanding that we do something and that if we don’t do it, they are going to punish us.”
Bestwall counsel Livia Kiser of Chicago said plaintiffs were potential claimants and parties in interest.
“The whole point of this process is to give money to claimants,” Kiser said.
Yandle asked, “What if they’re not interested parties?”
Kiser said if they didn’t want to get paid they didn’t have to respond.
Yandle said, “It’s not a subpoena. What is it?”
Kiser said, “It’s just a questionnaire that’s been done in many personal injury cases in bankruptcy settings.”
Yandle dismissed the complaint with prejudice.
She said plaintiffs didn’t articulate a protected interest to trigger due process and if there was such an interest they couldn’t allege they didn’t receive due process.
She said they received an opportunity to address the questionnaire in district court and had in fact done so.
She found no merit or authority for a position that she could police third party discovery in another district.
Beyer tallied up Bestwall’s costs in the Illinois action and ordered reimbursement from Maune Raichle.
The firm took it to Conrad as a final order but he didn’t see it that way.
He found numerous, significant and ongoing disputes over the questionnaire.
He found two appeals relating to it were filed after this appeal.
“The continued defiance of the bankruptcy court’s questionnaire order in an effort to avoid complying with it and appeal of the same will only further delay the administration of the bankruptcy case and cause a significant amount of piecemeal litigation,” he wrote.